Explain how long-run economic profits are linked to entry in monopolistic competition and perfect competition
What will be an ideal response?
In the short run all market structures allow for positive economic profits. However, those profits can only be maintained in the long run if other firms cannot enter the industry. If they can they will enter and competition will force the price of the good down until economic profits are zero.
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The table below describes the relationship between the number of workers hired by a call center each hour and the number of calls the call center can make each hour. The call center has only 1 telephone. The telephone costs the firm $5/hour (regardless of how many calls are made), and each worker is paid $10 per hour.Calls PerHourNumber ofTelephonesPer HourNumber ofWorkersPer Hour0$0$01$30$1002$40$1603$60$1904$100$2105$150$2206$210$225If the price of a telephone increases to from $5 to $10 an hour and nothing else changes, then:
A. total cost would not change. B. marginal cost would not change. C. fixed cost could not change. D. marginal cost would increase by $5 at every level of output.
The U.S. Treasury estimates that the fraction of U.S. currency held outside the United States is:
A. about half. B. between one-half and two-thirds. C. less than 10%. D. about one-fourth.
The figure below shows a situation where the producers of Good X are forming an international cartel. Here, MR = Marginal Revenue, and MC = Marginal Cost. The cartel will set a monopoly price for its output.
By how much would the consumer surplus fall after the formation of the cartel?
A. $5 billion B. $50 billion C. $15 billion D. $20 billion
Refer to the graph below. Assume that the economy is initially at equilibrium at point A. If there is a recession in the economy because AD1 shifts to AD2, and wages and prices are flexible, then in the long run the price level will be:
A. P2, and real output will be Qf
B. P3, and real output will be Qf
C. P1, and real output will be Qf
D. P2, and real output will be Q1