A competitive market is in long-run equilibrium. If demand increases, we can be certain that price will
a. rise in the short run. Some firms will enter the industry. Price will then rise to reach the new long-run equilibrium.
b. rise in the short run. Some firms will enter the industry. Price will then fall to reach the new long-run equilibrium.
c. fall in the short run. All, some, or no firms will shut down, and some of them will exit the industry. Price will then rise to reach the new long-run equilibrium.
d. not rise in the short run because firms will enter to maintain the price.
b
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A) the marginal private cost B) the marginal social cost C) the marginal external cost D) the marginal external benefit
The arguments against the use of active stabilization policy include all of the following except:
a. the responsiveness of voluntary unemployment to changes in GDP. b. the existence of policy lags. c. weak macroeconomic forecasting abilities. d. the possibility of policy errors because of limited information.