Monopolistic competitive firms in the long run earn:
a. positive economic profits.
b. zero pure economic profits.
c. negative economic profits.
d. none of these.
b
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Explain why specialization and trade increases a country's overall level of consumption
What will be an ideal response?
Dorothy lives in a city with high air pollution. Pollution is a bad, but she is able to avoid air pollution by wearing a face mask. Her preferences are given by
U(q1,q2 ) = (q1 - P)2q22 where q1 is the amount of time she spends wearing a mask, P is the amount of pollution and q2 is a composite of other goods (p2 = 1 ). Dorothy must decide how much to wear a mask and how much q2 to purchase. The price of masks is pM. Assume q1* > P when answering this question. a. Derive Dorothy's demand for masks, q1*(p1,Y, P) b. How does the quantity of pollution affect the demand for masks? That is, find q1*/P. c. How does her income influence the quantity of masks she purchases? That is, find q1*/Y. d. What condition must hold for the assumption q1* > P to hold?
As one moves down a straight-line demand curve away from the vertical axis, demand becomes less elastic and then inelastic
a. True b. False Indicate whether the statement is true or false
When income ________, the money ________ curve shifts to the right
A) increases; demand B) increases; supply C) decreases; demand D) decreases; supply