Which of the following best applies to the distinction between ...

[Shelles]

Which of the following best applies to the distinction between the long run and the short run?
 
  A) The short run is a period of approximately 1-6 months while the long run is any time frame which is longer.
  B) In the short run, only new firms may enter, while in the long-run firms may either enter or exit the market.
  C) The rationing function of price is a short-run phenomenon whereas the guiding function is a long-run phenomenon.
  D) All of the above statements are correct.

Question 2

Consider a society consisting of just a farmer and a tailor. The farmer has 10 units of food but no clothing. The tailor has 40 units of clothing but no food. Suppose each has the utility function U = F  C. The price of clothing is always 1.
 
  What is the competitive equilibrium price for food? A) 5
  B) 4
  C) 3
  D) 2

[millet]

Answer to Question 1

C

Answer to Question 2

B