Suppose that A Cleaner World invents a new type of laundry detergent that has an ingredient that stops stains from setting into clothes. If the laundry detergent market is monopolistically competitive, explain what will happen to the price of its product in the short run. What will happen in the long run?
What will be an ideal response?
In the short run consumers will buy its detergent because it is perceived to be better than other detergents and A Cleaner World will earn positive economic profits. In the long run other detergents will put the stain-stopping ingredient into their detergent. This will shift A Cleaner World's demand curve to the left, decrease the quantity they sell, and decrease the price they can charge until economic profits will become zero.
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An increase in the price of input used to produce a product will lead to
A) a decrease in the demand for that product. B) a decrease in quantity supplied of that product C) a decrease in the supply of that product. D) an increase in the supply of that product.
The supply of oil is likely to be
a. inelastic in both the short run and long run. b. elastic in both the short run and long run. c. elastic in the short run and inelastic in the long run. d. inelastic in the short run and elastic in the long run.
If the price of grapefruit rises, the substitution effect due to the price change will cause
A) a decrease in the demand for grapefruit. B) a decrease in the demand for oranges, a substitute for grapefruit. C) a decrease in the quantity of grapefruit demanded. D) a decrease in the quantity of grapefruit supplied.
All of the following are programs in the Social Security system except
A. the Temporary Assistance to Needy Families (TANF) program. B. the Old Age and Survivors Insurance program. C. the Medicare program. D. the Disability Insurance program.