In a monopolistically competitive market,
A. a firm has market power because it produces a differentiated product.
B. a firm earns economic profits in the long run because it has market power.
C. there are a large number of firms.
D. both a and b
E. both a and c
Answer: E
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The tariff levied in a "large country" (Home), lowers the world price of the imported good. This causes
A) foreign consumers to demand less of the good on which was levied a tariff. B) domestic demand for imports to decrease. C) domestic demand for imports to increase. D) foreign suppliers to produce less of the good on which was levied a tariff. E) no change in the foreign price of the good it imports.
Use the above table and assume a fixed cost of $1000. At an output of 1, marginal cost is
A. 0.
B. $200.
C. $300.
D. $400.
A tit-for-tat strategy is one in which oligopolies
A) cooperate as long as other members cooperate, but if anyone cheats, they cut the price until the cheater reverts to cooperation. B) cooperate almost all of the time, but occasionally do not cooperate in order to fool the antitrust authorities. C) keep cutting prices to punish rivals until the competitive price is reached. D) try to avoid the problems of the prisoners' dilemma, but actually make themselves worse off.
Which of the following statements is true?
A) Models help economists to explain the past, but do not help in predicting the future. B) The scientific method used by economists is based on idealism and not empiricism. C) Testing with data enables economists to distinguish between good models and bad models. D) Models that economists use are perfect replicas of reality.