Suppose the economy is initially in long-run equilibrium. For each of the shocks listed below, explain the long-run effects on output and the price level
(a) Labor supply decreases.
(b) The government shuts down the Bureau of Economic Analysis.
(c) Productivity increases.
(a) Output declines and the price level rises.
(b) Output is unchanged and the price level falls.
(c) Output rises and the price level falls.
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In the employment of any resource, a firm should
A) equate marginal revenue product with the cost of the additional resource. B) hire each input unit that adds more to revenue than it adds to costs. C) hire each input unit provided its marginal physical product is greater than zero. D) A and B are both correct.
Command-and-control regulation, as compared to incentive-based regulation, is:
A. efficient in the short run and in the long run. B. efficient in the short run, but not in the long run. C. inefficient in the short run, but efficient in the long run. D. inefficient in the short run and long run.