Consider the AD/AS model. The interest rate effect is reflected on the _______ and when the price level _________________
a. AS curve; rises, people feel poorer and buy less
b. AS curve; rises, goods become more expensive and foreigners buy less
c. AS curve; rises, interest rates fall, and people buy less
d. AD curve; rises, interest rates rise, and people buy less
e. AD curve; falls, interest rates fall, and people buy less
D
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A (very, very small) country produces milk and shirts and its production possibilities frontier is in the table above
a. The nation is currently producing at point B. What is the opportunity cost of two additional gallons of milk? At point C? At point D? What do your results show? b. Suppose the nation is initially producing 4 gallons of milk and 40 shirts. What is the opportunity cost of 2 additional gallons of milk? Explain your answer.
Perfectly competitive firms are price takers because
a. all small firms must take the price set by the largest firm in the market b. firms take the price that government determines is a "fair" price c. each firm is small and goods are perfect substitutes for one another d. free entry and exit in the short run creates a constant market price in the long run e. high barriers to entry force firms to compete by charging lower prices than other firms in the industry