One of the assumptions of monopolistic competition is that firms produce differentiated products. What does this assumption imply about the demand curve facing a representative firm?
What will be an ideal response?
Product differentiation is a source of market power. This implies that the monopolistically competitive firm faces a downward-sloping demand curve.
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Consider a small open economy with desired national saving of Sd = 1000 + 1000rw and desired investment of Id = 1000 - 500rw. Calculate national saving, investment, and the current account balance in equilibrium when the real world interest rate is
(a) rw = 0.025. (b) rw = 0.05. (c) rw = 0.0.
Factors that help determine the level of planned investment include
a. profit expectations. b. the interest rate. c. the size and age of the existing stock of capital. d. All of these.
When describing the opportunity cost of two producers, economists use the term
a. natural advantage. b. trading advantage. c. comparative advantage. d. absolute advantage.
From the perspective of consumers, a quota is preferred to a tariff.
Answer the following statement true (T) or false (F)