Competition has driven the economic profits in the video rental business to zero. Surya Bacha, who owns a video rental business, would be better off leaving the industry for another alternative

Define the shutdown point. Explain why the firm shuts down in the short run if the price falls below this point

What will be an ideal response?

Assume that the expectation of declining housing prices cause households to reduce their demand for new houses and the financing that accompanies it. If the nation has low mobility international capital markets and a flexible exchange rate system, what happens to the GDP Price Index and net nonreserve-related international borrowing/lending in the context of the Three-Sector-Model?

a. The GDP Price Index falls, and net nonreserve-related international borrowing/lending becomes more negative (or less positive). b. The GDP Price Index rises, and net nonreserve-related international borrowing/lending becomes more negative (or less positive). c. The GDP Price Index falls, and net nonreserve-related international borrowing/lending becomes more positive (or less negative). d. The GDP Price Index and net nonreserve-related international borrowing/lending remain the same. e. There is not enough information to determine what happens to these two macroeconomic variables.