The firm's short-run costs contain
A. only fixed costs.
B. both variable and fixed costs.
C. only variable costs.
D. only opportunity costs.
Answer: B
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A hypothesis that assumes that people combine the effects of past policy changes on economic events and their own judgment about future effects of current and future policy changes is known as
A) active expectations. B) modern expectations. C) rational expectations. D) adaptive expectations.
A principle difference between the new Classical and the new Keynesian models has to do with the choices made by business firms. We find that
A) new classical business firms choose the output level given the price level, while new Keynesian firms choose the price level given the level of output. B) new classical business firms choose the price level given the output level, while new Keynesian firms choose the output level given the level of output. C) both new classical and new Keynesian firms select the price level, but only new classical firms select the output level. D) both new classical and new Keynesian firms select the output level, but only Keynesian firms select the price level.