Why does perfect competition often lead to a market in which profits tend toward zero?
What will be an ideal response?
Perfect competition rewards the lowest-cost producer, so as competition increases, profits eventually erode to zero. In an early market, high profits attract competitors. As more competitors enter the market, there is downward pressure on prices, which reduces profits. Profits are reduced eventually to zero.
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A change in which of the following will have a direct effect on the amount of money individuals wish to hold in the current period?
A) the current nominal interest rate B) the current real interest rate C) the expected future nominal interest rate D) the expected future real interest rate E) all of the above
What potential problems are created by regulatory competition?
What will be an ideal response?
The table above gives data for the nation of Mosh. The MPC of the economy is
A) .75. B) 1. C) .90. D) .80. E) indeterminate with the information provided.
A natural oligopoly can form
A) if there are economies of scale. B) only if firms sell a differentiated good. C) only if firms sell a homogeneous good. D) if there is only one firm in the industry.