Describe the process that would occur in the long run in a competitive industry if there were economic profits. Illustrate this with a diagram.
What will be an ideal response?
The diagram should look like Figure 10-7 in the text. If there are economic profits, firms will enter the industry. The industry supply will increase and the price will fall. As the price falls, the profits of each firm will fall. The (representative) firm will therefore cut output, moving downward on its marginal cost curve. The process of entry will end when each firm is at the bottom of average cost so that there are no economic profits.
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According the graph shown, the profit-maximizing decision of the monopolist would be:
This graph shows the cost and revenue curves faced by a monopoly.
A. Q1, P1.
B. Q1, P3.
C. Q2, P2.
D. Q1, P2.
A firm's total cost of production is the
a. employees' opportunity cost b. owners' opportunity cost c. owners' opportunity cost minus the employees' opportunity cost d. owners' opportunity cost plus the employees' opportunity cost e. employees' opportunity cost minus the owners' opportunity cost
When the monetary authorities expand the supply of money rapidly,
a. its purchasing power tends to increase. b. holding money is a poor method of storing value. c. the long-run sustainable real growth rate of the economy will tend to increase. d. the prices of goods and services will generally decline.
A study by Kathryn Edin and Laura Lein found that
A. virtually all single mothers—whether working or receiving public assistance—had to supplement their income with money from relatives, boyfriends, or the absent father of their children. B. most welfare families lived very comfortably on their public assistance checks, supplemented by Medicaid, public housing, and food stamps. C. only half the number of Americans officially below the poverty line were actually poor. D. government assistance hurt the poor much more than it helped the poor.