The graph above shows supply and demand in the domestic market without trade. Producer surplus without trade is represented by area

If the Fed sells more bonds to the public, then the money supply will:

A. Decrease and the aggregate demand curve will shift to the right. B. Increase and the aggregate demand curve will shift to the right. C. Increase and the aggregate demand curve will shift to the left. D. If the Fed sells more bonds to the public, then the money supply will shift to the left.

In the short run, a perfectly competitive firm is producing an output level where marginal cost equals $10, average total cost equals $7, and marginal revenue equals $9 . Which of the following statements is correct?

a. The firm is earning an economic profit which could be increased by raising output. b. The firm is earning an economic profit which could be increased by lowering output. c. The firm is maximizing its economic profit. d. The firm is suffering an economic loss which could be decreased by raising output. e. The firm is suffering an economic loss which could be decreased by lowering output.