If the price level does not fall or only falls very slowly, then the result will be a prolonged period of
a. inflation whenever supply increases.
b. production below potential GDP.
c. production above potential GDP.
d. rapid price increases when demand changes.
b
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Wealth is redistributed from debtors to creditors when inflation was expected to be
a. high and it turns out to be high. b. low and it turns out to be low. c. low and it turns out to be high. d. high and it turns out to be low.
Answer the following questions true (T) or false (F)
1. In the long-run equilibrium, both the perfectly competitive firm and the monopolistically competitive firm produce the output at which MR=MC and charge a price equal to the average total cost of production. 2. Most economists believe that consumers would be better off if markets were perfectly competitive rather than monopolistically competitive. 3. An oligopolistic industry is characterized by a few large firms acting independently.