When firms in a price-taker market are temporarily able to charge prices that exceed their production costs,
a. the firms will earn long-run economic profit.
b. additional firms will be attracted into the market until price falls to the level of per-unit production cost.
c. the firms will earn short-run economic profits that will be offset by long-run economic losses.
d. the existing firms must be colluding or rigging the market, otherwise, they would be unable to charge such high prices.
B
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In the above figure, a movement from point B to point C could be explained by
A) an increase in the price level. B) a decrease in the quantity of money in circulation. C) increased government spending. D) the real-balance effect.
Which of the following statements concerning the history of U.S. inflation is not correct?
a. Prices rose at an average annual rate of about 3.6 percent over the last 80 years. b. There was about a 17-fold increase in the price level over the last 80 years. c. Inflation in the 1970s was below the average over the last 80 years. d. The United States has experienced periods of deflation.