What is the relationship between the long-run supply curve in a constant-cost industry and elasticity?
What will be an ideal response?
For the graph, quantity or output will be on the horizontal axis and price will be on the vertical axis. The long-run supply curve for a constant cost industry will be perfectly elastic. This means it will be horizontal, showing that the level of output will not affect the price in the long run. Firms can obtain all the resources they need at different output levels without affecting the minimum average total cost of production.
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Using the data in the above table, in the long-run macroeconomic equilibrium, the price level is ________ and the level of real GDP is ________
A) 115; $10 trillion B) 110; $10 trillion C) 105; $11 trillion D) 115; $11 trillion
Which of the following changes should make activist policy makers more confident in their capacity to make good policy recommendations?
A) structural change in the economy B) changes in multipliers C) a longer estimated lag for monetary policy D) none of the above