If resource suppliers and demanders find out that the actual price level exceeds the expected price level, they will take corrective actions that will:
a. cause the economy to move away from the potential output level
b. raise the unemployment level above the natural rate of unemployment.
c. shift the aggregate demand curve of an economy.
d. shift the short-run aggregate supply curve of an economy.
e. lower the actual price level.
d
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In the above figure, income is $8, the price of a soft drink is $1, and the initial price of a milkshake is $2. If the price of a milkshake decreases to $1, the substitution effect is the movement from point ________ to point ________
A) a; b B) b; d C) b; c D) a; c
The above figure shows the payoff matrix facing an incumbent firm and a potential entrant. Assuming a fixed cost of entry, the incumbent will deter entry because
A) it is more profitable than accommodating entry. B) it increases consumer surplus. C) the potential entrant winds up with zero profit. D) the incumbent would earn zero profit if it accommodated entry.