In the short run, a monopolistic competitor
A) produces at minimum efficient scale.
B) produces where P = AC.
C) sets P = MC.
D) sets MR = MC.
D
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Refer to the above figure. The government has just engaged in expansionary fiscal policy shifting the aggregate demand curve from AD1 to AD2. Interest rates have started to rise. Which of the following statements is TRUE in the short run?
A) Real GDP will be $14 trillion since the effect of government spending is not influenced by interest rates. B) Real GDP will end up somewhere between $11 and $14 trillion as businesses and consumers reduce their spending in response to the increase in interest rates. C) Real GDP will go beyond $14 trillion as businesses and consumers react to the increase in interest rates. D) Real GDP will fall back to $11 trillion since the effect that increased government spending has on real GDP is short lived.
When you borrow money from a bank, your bank charges you interest on the loan to compensate for all of the following except
A) inflation. B) liquidity risk. C) the risk of default. D) the opportunity cost of other uses for the loaned money.
The sign of the cross-price elasticity tells us whether two commodities are complements or substitutes, but the size of this elasticity measure tells us
a. how the supply side of the market reacts to changes in demand b. whether the government should regulate the two markets c. which technology producers use d. how closely the two goods are related e. whether or not excess profits can be made in either market
You win a lottery that pays $10,000 each year for the next 5 years beginning next year. How much are your winnings worth today?
A. $50,000 B. $45,455 C. $10,000 D. indeterminate with the given information