A perfectly competitive firm’s short-run supply is infinite at the market price.

If price is greater than the average variable cost, a profit-maximizing firm should:

A) contract production until price is equal to marginal cost. B) expand production until price is equal to marginal cost. C) contract production until total revenue is equal to total cost. D) expand production until total revenue is equal to total cost.

Assume that business investment spending rises, and the increase is funded by greater borrowing in the capital markets. If the nation has low mobility international capital markets and a fixed exchange rate system, what happens to the real GDP and net nonreserve international borrowing/lending balance in the context of the Three-Sector-Model? a. Real GDP rises and net nonreserve international

borrowing/lending balance becomes more positive (or less negative). b. Real GDP rises and net nonreserve international borrowing/lending balance becomes more negative (or less positive). c. Real GDP falls and net nonreserve international borrowing/lending balance becomes more positive (or less negative). d. Real GDP and net nonreserve international borrowing/lending balance remain the same. e. There is not enough information to determine what happens to these two macroeconomic variables.