Why can't a monopolistic competitor earn economic profits in the long run?
What will be an ideal response?
A monopolistic competitor may earn economic profits in the short run. In the long run, however, other firms will enter the market and produce substitutes for the product so that any economic profits earned by the existing firms will disappear due to competition. This means that the monopolistic competitor will earn zero economic profits in the long run.
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If the Federal Reserve conducts open market ________, the money supply ________, shifting the LM curve to the right, everything else held constant
A) purchases; decreases B) sales; decreases C) purchases; increases D) sales; increases
Assume the demand function for good X can be written as Qd = 80 - 3Px - 6Py + 10I, where Px = the price of X, Py is the price of Y and I is consumer income. If the price of Y decreases by 5 dollars, what would the reduction in Px have to be in order to keep the quantity demanded of Xunchanged by the change in the price of Y?
A) decreased by 10 dollars B) decreased by 5 dollars C) decreased by 2.5 dollars D) decreased by 1 dollar
The better the information provided to financial markets the:
A. greater will be the flow of funds in these markets. B. greater the amount of funds transferred between savers and borrowers, though risk increases. C. higher the return required by lenders. D. less the amount of funds transferred between savers and borrowers.
The APC is calculated as:
A. change in consumption/change in income. B. consumption/income. C. change in income/change in consumption. D. income/consumption.