Classical economists held the view that in the economy:
A. Demand creates its own supply
B. Unemployment is temporary and is soon eliminated
C. There is an imbalance between saving and investment
D. It is difficult for an economy to adjust because wages and prices are inflexible
B. Unemployment is temporary and is soon eliminated
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Oscar and Felix are the only firms that clean offices in a large city. They agree to operate as a cartel. The payoff matrix above shows the economic profit that each firm can make. If the game is played only once, then ________
A) Felix and Oscar will each make $10 million economic profit B) Felix will comply and Oscar will make $12 million economic profit C) Felix and Oscar will each make $1 million economic profit D) Felix will cheat and Oscar will make -$2 million economic profit
The value of total output decreases when labor leaves one industry and goes to another and capital leaves the second industry and goes to the first. This indicates that
A) the first situation was not efficient. B) the second situation is efficient. C) price is greater than marginal cost. D) it would be efficient to return to the first situation.