Consider the short-run supply curve for a perfectly competitive industry. In general, which of the following statements are true?
A. The industry supply curve tends to be flatter (more elastic) than the horizontal sum of all the industrial firms' supply curves.
B. The short-run industry supply is obtained by horizontally summing the supply curves of all the individual firms in the industry.
C. Short-run supply for a perfectly competitive industry is flat for constant cost industries.
D. both a and b
E. none of the above are true in general
Answer: D
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Refer to Figure 3. Originally, Ben was producing at his point A and Jerry was producing at his point A. Then, each person decided to specialize in the product in which he has a comparative advantage. Furthermore, they agreed to trade 4 pounds of cones for 2 pounds of ice cream. As a result of these new arrangements, the gains from trade relative to the original situation are as follows:
a. 1 additional pound of cones for Ben and 1 additional pound of ice cream for Jerry.
b. 1 additional pound of ice cream for Ben and 1 additional pound of cones for Jerry.
c. 2 additional pounds of ice cream for Ben and 2 additional pounds of cones for Jerry.
d. 2 additional pounds of ice cream for Ben and 1 additional pound of cones for Jerry.
If a country has an overvaluation problem, the best solution is to
A. sell more of its currency in the foreign exchange market. B. buy less of its currency in the foreign exchange market. C. decrease the money supply. D. increase the official rate.