Figure 9.2 shows the cost structure of a firm in a perfectly competitive market. If the market price is $10 and the firm chooses the profit maximizing output level, its profit is:

In which of the following situations would you prefer to be the borrower?

A) The interest rate is 9 percent and the expected inflation rate is 7 percent. B) The interest rate is 4 percent and the expected inflation rate is 1 percent. C) The interest rate is 13 percent and the expected inflation rate is 15 percent. D) The interest rate is 25 percent and the expected inflation rate is 50 percent.

Classical economists perceive that

A. investors' expectations about returns on investment are unstable. B. large investment swings are responses to small changes in interest rates. C. the best way to cure unemployment is to start a war. D. the proper cure for unemployment is active fiscal policy.