In the monopolistic competition model, the attribute of free entry suggests that:
a. all firms earn zero economic profits in the long run
b. some firms will be able to earn economic profits in the long run.
c. some firms will be forced to incur economic losses in the long run.
d. the market structure will eventually be characterized by perfect competition in the long run.
a
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New reports indicate that eating turnips helps people remain healthy. The news shifts the demand curve for turnips rightward. In response, new farms enter the turnip industry
During the period in which the new farms are entering, the price of a turnip ________ and the economic profit of each existing firm ________. A) rises; rises B) rises; falls C) falls; rises D) falls; falls
If all saving and investment could be placed into a tax-deferred saving account, then the federal income tax would approximate a consumption tax
a. True b. False
The marginal propensity to consume varies with income levels but is independent of consumer expectations
a. True b. False Indicate whether the statement is true or false
Why is P3 below P2 instead of above it?
a. New producers enter the industry and supply expands, driving down price.
b. Increased demand for inputs causes input prices to rise and output prices to fall.
c. Quantity decreases overall but demand drops, driving down price.
d. Demand shifted too far right and could not be sustained, so it shifted left again.