If nominal wages and salaries are fixed as firms change product prices, the short-run aggregate supply curve is:
a. vertical
b. horizontal.
c. negatively sloped.
d. positively sloped.
d
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Peter's Pencils is a perfectly competitive company producing pencils. Suppose Peter is producing 1,000 pencils an hour. If the total cost of 1,000 pencils is $500, the market price per pencil is $2, and the marginal cost is $2, then Peter
A) makes an economic profit because marginal revenue is equal to marginal cost at this output level. B) should decrease his output to increase his profit. C) is maximizing his profit and is making an economic profit. D) should increase his output to increase his profit. E) is not maximizing his profit but is making zero economic profit anyway.
In an open market purchase, the Fed ________ government securities, which ________ bank reserves
A) buys, increases B) buys, decreases C) sells, increases D) sells, decreases
In the long run, perfectly competitive firms make zero economic profit. This result is due mainly to which of the following assumptions?
A) few buyers and sellers B) unrestricted entry and exit C) firms must act as price takers D) demand for the firm's output is perfectly elastic
The short-run macro model
a. is an attempt to explain why the economy tends to perform better in the short run than in the long run b. was developed during the Great Depression to explain the economy's continuing poor performance c. lost its popularity during the 1950s d. was developed during the early 19th century e. explains the forces that work to drive the economy to full employment