If the Economy Is in Long Run Equilibrium at Full

question 168

Multiple Choice

If the economy is in long run equilibrium at full employment, the level of overall economic activity is not affected by changes in the price level due to:

• A) the fact that firms' profits increase with the price level.
• B) the existence of sticky prices.
• C) the fact that prices and input costs change simultaneously and in the same direction.
• D) the fact that prices increase more slowly than input costs.

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Definitions:

Mixed Cost

A cost that contains both variable and fixed cost elements, making its total expense vary with activity level but not in direct proportion.

Maintenance Costs

Expenses associated with the upkeep of buildings, equipment, machinery, or vehicles to ensure proper functionality and efficiency.

Machine Hour

A measure of the amount of time a machine is operated, used in calculating manufacturing costs and efficiency.

Total Salaries

The aggregate amount of compensation paid to employees before deductions, such as taxes and retirement fund contributions, are made.