In monopolistic competition, firms sell a differentiated product. In perfect competition, firms sell an identical product. How do these markets differ as a result?
What will be an ideal response?
Because of this difference, firms in monopolistic competition face a downward sloped demand curve and have price setting power. Firms in perfect competition do not—their demand curves are horizontal. Because of this difference, in the long run, perfectly competitive firms produce at minimum average cost while monopolistically competitive firms have excess capacity.
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According to supply-siders the main consequence of reducing tax rates is
A) increases aggregate demand and the price level. B) increases in aggregate supply. C) increases in aggregate supply and the price level. D) making the aggregate supply curve upward-sloping.
Perfectly competitive firms that earn an economic profit in the short run choose the output that
a. maximizes total revenue b. minimizes total cost c. maximizes the difference between total revenue and total cost d. maximizes the difference between total revenue and explicit cost e. maximizes the difference between total revenue and implicit cost
If you wanted to measure whether the output of an economy was increasing or decreasing across time periods, you would use the real GDP data rather than the nominal GDP data because
a. exports are excluded from real GDP but not nominal. b. real GDP incorporates the impact of federal budget deficits and surpluses; nominal GDP does not. c. real GDP reflects the impact of transfer payments on the economy, but nominal GDP does not. d. real GDP adjusts for changes in the general level of prices, but nominal GDP does not.
Which of the following statements is correct?
a. Advocates for drug-interdiction policies that reduce the supply of illegal drugs argue that the demand for illegal drugs may be more responsive in the long run than in the short run. b. The demand for illegal drugs is price inelastic. c. Drug interdiction efforts that reduce the supply of illegal drugs may increase drug-related crimes. d. All of the above are correct.