What three assumptions are used in the chapter to keep the analysis relatively simple?
What will be an ideal response?
The three assumptions are: (a) The only long-run adjustment is the result of the entry or exit of firms in an industry; (b) All firms in the industry have an identical cost curve; (c) The industry is a constant-cost industry, which means that the change in the number of firms in an industry do not affect resource prices or the average total cost curves of individual firms.
You might also like to view...
An economy has a fixed price level, no imports, and no income taxes. An increase in autonomous expenditure of $2 trillion increases equilibrium expenditure by $8 trillion
Calculate the multiplier and explain what happens to the multiplier if an income tax is introduced.
If the exchange rate falls, domestic goods become relatively ______ expensive. This change in the affordability of domestic goods makes domestic goods _____ attractive to domestic residents. So, _______ ______
Fill in the blank(s) with correct word
If wages drop below the market equilibrium level in a competitive labor market:
A. unemployment will persist until the wage increases. B. firms will be able to offer lower wages and still fill all the jobs they have. C. firms will demand more labor than workers are willing to supply. D. All of these statements are true.
The minimum payment you are willing to accept to do a job is your:
A. reservation price. B. value of marginal product. C. real wage. D. nominal wage.