If short-run economic profits are greater than zero for firms in a monopolistically competitive market, in the long run we expect:
A. entry barriers to prevent competing firms from entering this market.
B. the demand curve for firms in the market to shift to the right.
C. competing firms to enter the market and sell similar products.
D. profits to increase.
Answer: C
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Economists have estimated that the cross-price elasticity of demand between beer and spirits is -0.50, the income elasticity for spirits is 1.21 and the income elasticity for wine is 5.03
These elasticities mean that beer and spirits are ________, and spirits and wine are ________. A) complements; substitutes B) substitutes; luxuries C) complements; luxuries D) normal goods; luxuries
Government may intervene in markets
a. to regulate firms like public utilities. b. directly, like creating a public service like the delivery of mail. c. indirectly, like planning an d funding multipurpose water projects that provide electricity, flood control and irrigation . d. All of the above are ways government may intervene in markets.
As part of the "exchange rate effect of monetary policy," a lower money supply causes a __________ interest rate and thus __________ of the domestic currency
A) higher; appreciation B) higher; depreciation C) lower; appreciation D) lower; depreciation
Which of the following is true of the relationship between price and marginal cost under monopolistic competition?
a. P = MC at all levels of output b. P = MC only at the profit-maximizing quantity c. P > MC at the profit-maximizing quantity d. P < MC at the profit-maximizing quantity e. P < MC at the quantities below the profit-maximizing quantity