Costs that require a firm to spend money are considered:
A. explicit costs.
B. fixed costs.
C. implicit costs.
D. variable costs.
Answer: A
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When regulators require that a natural monopoly sets price equal to average total cost:
a. it is said to be allowing a fair rate of return. b. the firm earns a super normal profit. c. the firm shuts down permanently. d. the firm operates at the profit-maximizing level of output. e. the firm shuts down temporarily.
After a hurricane in Florida knocked out the regional water supply for several days, the demand for bottled water increased sharply. In a market economy, how will this increase in demand affect the equilibrium price and quantity of bottled water?
a. Price will increase, and quantity will decrease. b. Price will decrease, and quantity will decrease. c. Price will decrease, and quantity will increase. d. Price will increase, and quantity will increase.
Exhibit 20-5 Money, investment and product markets
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In Exhibit 20-5, a shift in aggregate demand from AD2 to AD3:
A. increases real GDP, and lowers the price level. B. decreases real GDP, and lowers the price level. C. increases real GDP, and raises the price level. D. decreases real GDP, and raises the price level.
Starting from long-run equilibrium, a war that raises government purchases results in ________ output in the short run and ________ output in the long run.
A. lower; potential B. higher; potential C. higher; higher D. lower; higher