How is perfect competition similar to and different from monopolistic competition?
What will be an ideal response?
Both perfect competition and monopolistic competition have relatively free entry of new firms, similar long-run price and output behavior, and zero long-run economic profits. However, the monopolistically competitive firm produces a product that is differentiated from other products. Perfect competition produces products that are identical or homogeneous. As a result, firms in monopolistic competition can have some degree of monopoly power. They also can profit from attracting more customers and therefore have an incentive to advertise.
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Refer to the figure below.________ inflation will eventually move the economy pictured in the diagram from short-run equilibrium at point ________ to long-run equilibrium at point ________. 
A. Rising; A B. Falling; A; C C. Falling; B: C D. Rising; A; C
In the figure above, the total revenue of a perfectly price-discriminating monopolist at the profit-maximizing output is equal to the area of
A) 0aij. B) 0dgh. C) aci. D) obeij.
Hedging risk for a short position is accomplished by
A) taking a long position. B) taking another short position. C) taking additional long and short positions in equal amounts. D) taking a neutral position.
Which of the following is a method which can be used for estimation in simultaneous equations models?
A. Feasible generalized least squares estimation B. Prais-Winsten transformation C. Cochrane-Orcutt transformation D. Two stage least squares estimation