At Long-Run Macroeconomic Equilibrium

question 215

Multiple Choice

At long-run macroeconomic equilibrium,

• A) an inflationary gap exists.
• B) real GDP equals potential GDP.
• C) a recessionary gap exists.
• D) real GDP is less than potential GDP but is as close as it is possible to be.

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Definitions:

Cournot Equilibrium

A condition in a duopoly market where each firm chooses the quantity to produce to maximize its own profit, assuming the other's output is fixed.

Marginal Cost

An additional cost incurred by producing one more unit of a product or service, a key concept in economics for decision-making.

Inverse Demand Curve

A graphical representation showing the relationship between the price of a good and the quantity demanded when price is the independent variable.

Cournot Duopolists

Firms in a duopoly market structure (two firms) where each firm determines its production level assuming the other firm's production level is fixed, as in the Cournot competition model.