If firms in a monopolistically competitive industry are operating with economic losses, over time we would see
A. some firms exiting the industry, causing the market supply curve to shift to the left, raising price.
B. some firms exiting the industry, causing the demand curves of the remaining firms to shift to the right.
C. firms alter their advertising rates until they made at least normal profits.
D. the firms working together to increase price and everyone's profitability.
Answer: B
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Based on the figure below. Starting from long-run equilibrium at point C, a decrease in government spending that decreases aggregate demand from AD1 to AD will lead to a short-run equilibrium at__ creating _____gap.
A. B; no output B. D; an expansionary C. B; recessionary D. D; a recessionary
If the interest rate is 7 percent on euro-denominated assets and 5 percent on dollar-denominated assets, and if the dollar is expected to appreciate at a 4 percent rate, for Francois the Frenchman the expected rate of return on dollar-denominated
assets is A) 11 percent. B) 9 percent. C) 5 percent. D) 3 percent. E) 1 percent.
To purchase goods from France, you must supply dollars and demand euros
Indicate whether the statement is true or false
Figure 6.5 shows the short-run and long-run effects of an increase in demand of an industry. The market is in equilibrium at point A, where 100 identical firms produce 6 units of a product per hour. If the market demand curve shifts to the right, which of the following statements is true in the short run?
A. The market price rises to $12, which is greater than the average total cost. B. Each existing firm maximizes its profit by producing the output where marginal cost equals $12. C. Each existing firm produces two more units per hour, compared to its initial profit-maximizing output level at point A. D. All of these are correct.