When the Motor Carrier Act of 1980 was made into law, new firms entered into the trucking industry. This action by new trucking firms confirms that:
A. the trucking industry was earning profits in the long run prior to the entry of the new firms.
B. the trucking industry was earning losses in the long run prior to the entry of the new firms.
C. the trucking industry was earning profits as a result of the entry of the new firms.
D. the trucking industry was earning losses before and after the entry of the new firms.
Answer: A
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Based on the figure below, the economy is initially at point A on the monetary policy reaction function (RF1) and the aggregate demand curve (AD1). The actual rate of inflation is ?' and the Federal Reserve's target inflation rate is ?*1. 
If the Federal Reserve lowers its target inflation rate to ?*2, then the Federal Reserve's monetary policy reaction function will ________ and the aggregate demand curve will ________.
A. shift to RF3; shift to AD2 B. shift to RF2; shift to AD2 C. shift to RF2: shift to AD3 D. shift to RF3: shift to AD3
As disposable income increases, consumption:
A. may either increase or decrease depending on the mpc. B. decreases. C. may either increase or decrease depending on the wealth effect. D. increases.
When the curve that envelops the series of possible short-run average total cost curves is horizontal, this means that there are:
A. economies of scale. B. diseconomies of scale. C. constant returns to scale. D. diminishing returns.
The production possibilities curve represents
A) the total amount of stocks and bonds that exist in the economy. B) the trade-off between human capital and physical capital that exists. C) all possible combinations of total output that can be produced. D) society's needs.