When do new firms enter a perfectly competitive market? When does entry stop?
What will be an ideal response?
New firms enter a perfectly competitive market as long as the existing firms are making an economic profit. Essentially the new firms enter in order to make an economic profit themselves. Entry stops when it is no longer possible to make an economic profit, which occurs when the existing firms are earning zero economic profit, that is, the owners are earning a normal profit.
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The table above gives a nation's investment demand and saving supply schedules. It also has the government's net taxes and expenditures. When the real interest rate is 4 percent, the supply of loanable funds is equal to
A) $10 billion. B) $50 billion. C) $90 billion. D) $80 billion. E) $30 billion.
If planned aggregate expenditure is less than total production
A) the economy is in equilibrium. B) GDP will increase. C) actual inventories will equal planned inventories. D) firms will experience an unplanned increase in inventories.
Identify some of the possible transactions costs involved in an exchange of a used car between two individuals
Which of the following will result as part of the interest rate effect when the price level rises? a. Households and firms increase their holdings of money
b. Interest rates will increase. c. A lower quantity of real GDP will be demanded. d. All of the above will result as part of the interest rate effect when the price level rises.