A perfectly price-elastic demand is consistent with which of the following?
a. Inferior goods
b. A low cross-price elasticity of demand
c. A horizontal demand curve
d. Few close substitutes
c
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In the base year:
A. nominal and real GDP are equal by definition. B. real GDP will only be larger than nominal GDP if prices increased in the base year. C. nominal GDP is always larger than real GDP because prices are held constant. D. real GDP is always larger than nominal GDP because prices are held constant.
Assume that a perfectly competitive constant-cost industry is in long-run equilibrium when market demand suddenly decreases. Which of the following statements is incorrect?
a. Existing firms will start to suffer short-run losses b. Existing firms will shut down in the short run if average variable cost exceeds average revenue at all output levels c. Some firms will leave the industry in the long run d. The market supply curve will shift to the right in the long run e. Any short-run losses will be eliminated in the long run
Suppose farmers get together and decide to be less productive. They want to do this so that they can shift the supply curve of farm products leftward and raise the price. They must be assuming that the demand curve between the current price and the higher price is
A) inelastic. B) elastic. C) unit elastic. D) There is not enough information to answer this question.
Which of the following statements about marginal cost is correct?
a. If the cost to produce one more unit of output is lower than the previous average cost, then producing one more unit brings down the average. b. Marginal cost is a calculation of the cost of one unit of output, and therefore it can have no effect on average costs. c. As the cost per change in one unit of output increases, average costs of production decrease in an inverse relationship. d. The cost of producing one more unit of output decreases as output grows, whereas average costs rise with output.