When a firm is at its minimum efficient scale of operation, it produces the
A) maximum rate of output at which long-run average cost is minimized.
B) minimum rate of output at which long-run average cost is minimized.
C) maximum rate of output consistent with lowest long-run marginal cost.
D) minimum rate of output consistent with lowest long-run marginal cost.
Answer: B
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An example of a firm in monopolistic competition is
A) your local water company. B) the sole cable television company. C) the many Chinese restaurants in San Francisco. D) Kansas Power and Light, the sole provider of electricity in Kansas City. E) Shaniq, a wheat farmer.
The classical model predicts that, in the short-run, a tax cut financed by an increase in the money supply would
a. leave output and the price level unchanged. b. increase the price level but leave output unchanged. c. increase output but and reduce the price level. d. increase output and the price level by increasing aggregate demand. e. None of the above.