Starting from a Short-Run Equilibrium Greater Than the Natural Rate

question 120

Multiple Choice

Starting from a short-run equilibrium greater than the natural rate of output, as the economy returns to a long-run equilibrium:

• A) both output and the price level will increase.
• B) output will decrease, but the price level will increase.
• C) output will increase, but the price level will decrease.
• D) both output and the price level will decrease.

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Definitions:

Two-part Tariff

A two-part tariff is a pricing strategy that includes a fixed fee plus a variable charge based on the quantity of goods or services consumed.

Up-front Fee

An up-front fee is a charge or payment required before the receipt of a service or product, typically used to cover initial costs.

Price Discrimination

Price discrimination is a pricing strategy where identical or substantially similar goods or services are sold at different prices by the same provider in different markets or to different segments of consumers.

Optimal Two-part Tariffs

A pricing strategy that includes a fixed fee plus a variable charge based on usage, designed to maximize profit while catering to consumer usage patterns.