Resource prices that are fixed by long-term contracts help explain why, in the short run, firms will
a. increase output when product prices increase.
b. keep production levels constant when product prices decrease.
c. keep their product prices constant even if the demand for their good increases.
d. keep their product prices constant even if the demand for their good decreases.
A
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Suppose that the government enacts a tax on Good X. In order to estimate the effect of the tax on the quantity demanded of a related good, Good Y, we can use the concept of the:
A) price elasticity of demand. B) income elasticity of demand. C) cross-price elasticity of demand. D) cost elasticity of demand.
Using Figure 1 above, if the aggregate demand curve shifts from AD2 to AD3 the result in the short run would be:
A. P1 and Y2. B. P2 and Y3. C. P3 and Y1. D. P2 and Y2.