Give an example that shows what happens to economic profits when firms enter a monopolistically competitive industry.
What will be an ideal response?
Examples will vary, but should show a thorough understanding of what happens when firms enter a monopolistically competitive industry. For example, let’s say the ping-pong market is earning large profits because of the increased popularity of the game. Soon more firms want to enter this industry and start producing ping-pong tables and paddles. Gradually, the increased production of ping-pong equipment will reduce the demand for each individual firm and thereby reduce profits. This process will continue until the industry reaches zero economic profits. Also, the demand becomes more elastic because buyers have more substitutes to choose from.
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Latin America
A) is significantly smaller than the NAFTA market in terms of population. B) has a smaller population, but a larger GDP than the NAFTA market. C) has a larger population than the NAFTA market. D) is similar in population to the NAFTA market.
Suppose the cost of flying a 200-seat plane for an airline is $100,000 and there are 10 empty seats on a flight. The airline should sell a ticket to a standby passenger only if the passenger is willing to pay
a. more than $200. b. more than $300. c. more than $500. d. This cannot be determined from the information given.
Refer to the information provided in Figure 33.4 below to answer the question(s) that follow.
Figure 33.4Refer to Figure 33.4. The domestic price of a leather wallet is $20. With free trade the price of a leather wallet is $10 and after a tariff is imposed the price is $15. If there is free trade, this country will ________ 200 leather wallets.
A. export B. import C. sell D. buy
If the exchange rate is $1 = 0.7841 euro, then a French DVD priced at 20 euros would cost to an American buyer (excluding taxes and other fees):
A. $15.68 B. $20.78 C. $25.51 D. $27.84