If a monopolistically competitive firm breaks even, the firm
A) is earning an accounting profit and will have to pay taxes on that profit.
B) is earning zero accounting and zero economic profit.
C) should advertise its product to stimulate demand.
D) should expand production.
Answer: A
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Refer to the graph below. The movement from point 1 to point 2 is stimulated by a disequilibrium in which there is domestic ________ and ________
A) overemployment; trade surplus B) unemployment; trade surplus C) overemployment; trade deficit D) unemployment; trade deficit E) inflation; unemployment
Suppose that there is a negative aggregate demand shock and the central bank commits to an inflation rate target. If the commitment is credible, then
A) the public's expected inflation will remain unchanged. B) the short-run aggregate supply curve will rise. C) over time inflation will fall. D) all of the above. E) both A and C.