What is the shape of the modern short-run aggregate supply (SRAS) curve? Why?
What will be an ideal response?
The short-run aggregate supply curve is initially horizontal, then upward sloping. If the price level increases in the short run, some costs for firms stay constant. The higher product price leads to higher profits, and the firms expand production. Hence, aggregate output can increase in the short run.
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Does a perfectly competitive producer have any incentive to undercut the current market price? Explain your answer
What will be an ideal response?
The indifference curves of two investors are plotted against a single budget line. Indifference curve A is shown as tangent to the budget line at a point to the left of indifference curve B's tangency to the same line
A) Investors A and B are equally risk averse. B) Investor A is more risk averse than investor B. C) Investor A is less risk averse than investor B. D) It is not possible to say anything about the risk aversion of the two investors, but they will hold the same portfolio. E) It is not possible to say anything about either the risk aversion or the portfolio of the two investors.