Use the following graph to answer the next question.
The graph shows the supply and demand for money where Dm1, Dm2, and Dm3 represent different demands for money and Sm1, Sm2, and Sm3 represent different levels of the money supply. The initial equilibrium point is A. What will be the new equilibrium point following an autonomous increase in the asset demand for money?
A. I
B. D
C. G
D. C
Answer: D
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Monopolistic competition is characterized by excess capacity because
A. firms charge a price that is greater than marginal cost. B. firms produce at an output level less than the least-cost output. C. firms are always profitable in the long run. D. the demand for a product is perfectly elastic in this type of industry.
In a Bertrand model with differentiated products
A) firms can set price above marginal cost. B) firms set price at marginal cost. C) price is independent of marginal cost. D) firms set price independently of one another.
Income elasticity measures the
A. Percentage change in quantity demanded given a percentage change in wealth. B. Responsiveness of quantity demanded to a percentage change in income. C. Way in which consumers switch from one product to another when price rises. D. Responsiveness of quantity demanded for one good to a percentage change in price of another good.
Other things being equal, the more wealth households have, the more they consume.
Answer the following statement true (T) or false (F)