Figure 29-1 -Refer to Figure 29-1. Currency Speculators Believe That the Value

question 170

Multiple Choice

Figure 29-1
-Refer to Figure 29-1. Currency speculators believe that the value of the euro will decrease relative to the dollar. Assuming all else remains constant, how would this be represented?

• A) Supply would decrease, demand would decrease and the economy moves from B to C to D.
• B) Supply would increase, demand would decrease and the economy moves from C to B to A.
• C) Supply would decrease, demand would increase and the economy moves from A to D to C.
• D) Supply would increase, demand would increase and the economy moves from D to A to B.

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Definitions:

Average Costs

The total cost of production divided by the number of units produced, representing the cost per unit of output.

Returns to Scale

The variation in production output resulting from a proportional alteration of all input factors in the manufacturing process.

Constant-Cost Industry

An industry in which the input prices and production costs remain constant as the industry output changes.

Long-Run Equilibrium

A state in which all firms in an industry are producing at their minimum long-run average cost and are earning normal profits.