Answer the following statement true (T) or false (F)
1) The larger the number of firms and the less the degree of product differentiation, the greater
will be the elasticity of a monopolistically competitive seller's demand curve.
2) The economic profits earned by monopolistically competitive sellers are zero in the long run.
3) The excess capacity problem associated with monopolistic competition implies that fewer firms
could produce the same industry output at a lower total cost.
4) The demand curve of a monopolistically competitive firm is more elastic than that of a pure
monopolist.
1) T
2) T
3) T
4) T
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Tariffs provide domestic producers with incentives to be inefficient and operate on the basis of comparative disadvantage
Indicate whether the statement is true or false
The price level influences aggregate supply in the___ run but not in the ___run.
Fill in the blank(s) with the appropriate word(s).
The World Trade Organization:
A. is also known as the International Monetary Fund (IMF). B. is also known as NAFTA. C. was established to resolve disputes arising under world trade rules. D. enhances world trade by providing interest rate subsidies to foreign borrowers who buy exports on credit.
You have collected data for a cross-section of countries in two time periods, 1960 and 1997, say
Your task is to find the determinants for the Wealth of a Nation (per capita income) and you believe that there are three major determinants: investment in physical capital in both time periods (X1,T and X1,0), investment in human capital or education (X2,T and X2,0), and per capita income in the initial period (Y0). You run the following regression: ln(YT) = ?0 + ?1X1,T + ?2X1,0 + ?3X2,T + ?4X1,0 + ln(Y0) + uT One of your peers suggests that instead, you should run the growth rate in per capita income over the two periods on the change in physical and human capital. For those results to be a parsimonious presentation of your initial regression, what three restrictions would have to hold? How would you test for these? The same person also points out to you that the intercept vanishes in equations where the data is differenced. Is that true? What will be an ideal response?