Refer to the above graph of the representative firm in monopolistic competition. Excess capacity for this firm would be calculated by:
A. E - C.
B. D - 0.
C. E - D.
D. D - C.
Answer: C
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Draw an aggregate supply and aggregate demand graph which shows the economy producing an output which exceeds potential output in the short run, and the adjustment that will occur as the economy adjusts to long-run equilibrium
What will be an ideal response?
Who is affected by externalities? Those receiving external benefits differ from those incurring external costs in that external benefits are associated with
a. government intervention b. market failure c. unclear property rights d. third parties e. free riders
The main problem with using the infant industries argument to justify protecting an industry from foreign competition is that
a. all industries will claim that they are infant industries in order to gain protection. b. the protected industry will become too efficient and drive out foreign competition. c. once in place, it is difficult to remove protection even as the industry matures. d. it causes the goods that are produced in the protected industry to have lower prices.
In classifying expenditures, which of the following is an illustration of an “object”?
A. Arson investigation B. Fire Department C. Materials and supplies D. Public Safety