The vertical Phillips curve occurs in the long run because
A. wage and price rigidities prevent changes in aggregate demand to change unemployment.
B. economic agents are quick to respond to changes in the price level.
C. the aggregate supply curve is vertical which means that changes in aggregate demand will not change unemployment.
D. of lags in monetary and fiscal policies.
Ans: C. the aggregate supply curve is vertical which means that changes in aggregate demand will not change unemployment.
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Refer to Figure 17-4. Which of the following is true at W2?
A) The supply curve is positively sloped. B) The income effect and the substitution effect are equal. C) The substitution effect is larger than the income effect. D) The income effect is larger than the substitution effect.
In the short run, how will a profit-maximizing monopolist react if its marginal cost suddenly increases? It will
a. lower price to expand revenue possibilities b. restrict output to extract a higher price from customers c. maintain the current price if profit is still positive d. increase plant size to lower marginal cost e. decrease plant size to lower marginal cost