Which of the following statements about a monopolistically competitive firm is FALSE?
A. It may earn short-run economic profits.
B. It sets price like a perfectly competitive firm.
C. It produces the quantity at which MC=MR.
D. It tries to differentiate its product from that of competitors.
Answer: B
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Game theory is a model for describing oligopoly price decisions among firms that are:
a. interdependent. b. independent. c. regulated d. merging
When the money market is drawn with the value of money on the vertical axis, if money demand shifts leftward, then initially there is an
a. excess demand for money which causes the price level to rise. b. excess demand for money which causes the price level to fall. c. excess supply of money which causes the price level to rise. d. excess supply of money which causes the price level to fall.
Which of the following statements is true?
A) If the opportunity costs differ between two countries, there is no opportunity for mutually advantageous trade. B) International trade leads countries to specialize in the production of those goods for which they have an absolute, rather than a comparative, advantage. C) Free international trade can increase the availability of all goods and services in the countries that participate in trade. D) The potential costs of free trade generally outweigh the benefits.
Someone notices that sunspot activity is high just prior to recessions and concludes that sunspots cause recessions. This person has:
A. confused association and causation. B. misunderstood the Ceteris paribus assumption. C. used normative economics to answer a positive question. D. built an untestable model.