Assume that firms in a perfectly competitive market are earning economic profits. Which of the following statements describes the change in market price and output as a result of the entry of new firms into this market?
A) The market demand curve shifts to the right, causing price to rise and market output to increase.
B) The market demand curve shifts to the left, causing price to fall and market output to decrease.
C) The short-run market supply curve shifts to the right, causing price to fall and total market output to increase.
D) The short-run market supply curve shifts to the left, causing price to rise and total market output to decrease.
Answer: C
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If consumer purchases of a good are not very sensitive to the price of the good, this is illustrated by a
a. demand curve that is relatively flat (more horizontal). b. demand curve that is relatively steep (more vertical). c. supply curve that is relatively flat (more horizontal). d. supply curve that is relatively steep (more vertical).
Refer to the information provided in Figure 23.3 below to answer the question(s) that follow.
Figure 23.3Refer to Figure 23.3. Aggregate saving is $240 if aggregate income is
A. $300. B. $500. C. $800. D. $1,000.