Why is it that a monopolistically competitive firm cannot earn positive economic profits in the long run?
What will be an ideal response?
A monopolistically competitive firm can earn positive economic profits only in the short run. In this case, other firms will enter the industry and produce substitutes for the existing firm's product so that its demand curve will become more elastic. Because of the increased competition in the long run, the existing firms' economic profits will disappear.
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What is the main reason for changes in GDP in the short run?
What will be an ideal response?
Imperfect information is a critical assumption in the
a. classical model. b. Keynesian model. c. monetarist model. d. new Keynesian model. e. real business cycle model.
Which of the following would be most likely to have monopoly power?
a. an online bookstore b. a municipal water company c. a local restaurant d. a grocery store
Refer to the information provided in Figure 2.4 below to answer the question(s) that follow.
Figure 2.4According to Figure 2.4, as the economy moves from Point A to Point E, the opportunity cost of motorcycles, measured in terms of hybrid cars
A. remains constant. B. decreases. C. initially increases, then decreases. D. increases.