If a purely competitive constant-cost industry is realizing economic profits, we can expect industry supply to:
A. increase, output to increase, price to decrease, and profits to decrease.
B. increase, output to increase, price to increase, and profits to decrease.
C. decrease, output to decrease, price to increase, and profits to increase.
D. increase, output to decrease, price to decrease, and profits to decrease.
Answer: A
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Using the chained-dollar method to calculate real GDP, real GDP is calculated by
A) valuing the current output at last year's real GDP prices. B) valuing the current output at current year prices. C) averaging the growth of output from one year to the next when the growth rates are calculated using this year's prices and using last year's prices. D) either A or C, depending which gives the larger value for real GDP. E) averaging the value of current output valued using base year prices and current output valued using current year prices.
The price elasticity of demand for corn is 0.4. A new hybrid of corn is discovered and all farmers start to use it, which increases the quantity of corn they can produce from each acre. What happens to the farmers' total revenue?
A) The total revenue will increase. B) The total revenue will decrease. C) The total revenue will not change. D) There is not enough information to determine what happens to the total revenue.