If AC > p where MR = MC
A) firms earn positive profits and new firms will enter.
B) firms earn negative profits and existing firms will leave.
C) firms earn zero profits and new firms will not enter and no existing firms will leave.
D) None of the above.
B
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The change in total welfare from a 10% increase in price will depend only on the elasticity of demand
Indicate whether the statement is true or false
The United States sees its overall price level decline, ceteris paribus. Considering this, which of the following actions would most likely happen next?
a. U.S. firms invest more money in bonds and savings accounts, which lowers interest rates. b. U.S. consumers spend less money, which increases the quantity of real GDP demanded. c. U.S. firms hold more money to buy goods and services, which raises interest rates. d. U.S. households borrow more money, which decreases the demand for loanable funds.