The more substitutable capital and labor are in production, the more likely it is that the cross-price demand curve for capital (relative to the wage) is upward sloping.

Starting from long-run equilibrium, a large tax increase will result in a(n) ________ gap in the short-run and ________ inflation and ________ output in the long-run.

A. recessionary; lower; potential B. expansionary; lower; potential C. expansionary; higher; potential D. recessionary; lower; lower

The perfect competitor shown in the graph above is in the

A. short run making a profit.
B. short run taking a loss.
C. long run making a profit.
D. long run breaking even.