What is meant by "excess capacity"? How does it relate to consumer utility?
What will be an ideal response?
Excess capacity refers to a situation where a firm does not produce at the lowest possible average cost. In other words, economies of scale have not been exhausted. Excess capacity is an inevitable consequence of product differentiation. Firms differentiate their products in order to appeal to consumers' varied tastes. Consumers are, therefore, better off—they have greater utility—than they would be if companies did not differentiate their products. Consumers are willing to pay for the higher costs that result from product differentiation.
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The main policy goal for a country according to the mercantilists is
A) to create a one-time deficit in the balance of payments. B) to create a continuing deficit in the balance of payments. C) to create a one-time surplus in the balance of payments. D) to create a continuing surplus in the balance of payments. E) to create specie overflows.
Monopolistically competitive firms have an incentive to:
A. engage in tactics for bringing in more customers. B. advertise. C. engage in brand promotion. D. All of these statements are true.
Each year, the president must submit a budget proposal to Congress by:
a. January. b. April. c. July. d. October.
The Keynesian mechanism through which monetary policy affects the price level, real GDP, and employment depends on the impact of the:
A. interest rate on savings. B. inflation on investment. C. interest rate on investment. D. interest rate on bond prices.