Suppose the economy includes two distinct groups of people: wage earners and goods sellers. If the price level falls by 10 percent and nominal wages remain unchanged,
a. there will be no redistribution of purchasing power because all wage earners in the U.S. economy receive indexed wages
b. income will be redistributed from wage earners to goods sellers
c. income will be redistributed from goods sellers to wage earners
d. real wages will fall by 10 percent
e. real wages will remain unchanged
C
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Which of the following statements regarding the long-term equilibrium is TRUE?
A) As new firms enter a market, each existing firm increases the quantity it produces. B) Firms leave a market if they are making zero economic profit. C) Entry and exit stop when firms are making an economic profit. D) Entry and exit stop when firms make zero economic profit.
A monopolist faces the inverse demand curve P = 60 - Q. It has variable costs of Q2 so that its marginal costs are 2Q, and it has fixed costs of 30. At its profit maximizing output level, the monopoly's average cost is
A) 11. B) 13. C) 17. D) 21.5.