Describe why monopolistically competitive firms find it important to establish brand loyalty.
What will be an ideal response?
The extent of power a monopolistically competitive firm has depends on how successfully it can differentiate its product from those of other firms-that is, on how much brand loyalty it can establish. Brand loyalty makes the firm's demand curve less price-elastic and gives producers greater control over the prices of their products. This also makes consumers less likely to switch to a substitute good, so the cross-price elasticity of demand is low.
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In a perfectly competitive market, if market price is higher than the average total cost of production, ________
A) firms will incur losses in the long run B) firms will make profits in the long run C) new firms will enter the industry D) firms will exit the industry
Which of the following is not a function of the Federal Reserve System, or the "Fed"?
A) acting as a lender of last resort B) acting as a banker's bank C) taking actions to control the money supply D) insuring deposits in the banking system E) performing check clearing services
There are only two people in the world (Adam and Eve) and only one good (apples). Adam has four apples and a total utility in money terms from apple consumption of $16; Eve has four apples and a total utility from apple consumption of $20. Which of the following statements must be true?
A. Eve’s marginal utility from consuming her fourth apple must be greater than Adam’s marginal utility from consuming his fourth apple. B. The total utility of society will rise if Adam gives Eve one apple. C. If Adam and Eve each always has a positive marginal utility from consuming apples, the total utility of society can only be increased by an increase in the total number of apples available for consumption. D. Adam’s average utility from consuming apples is greater than Eve’s average utility from consuming apples.
In a multiple regression model, the OLS estimator is consistent if:
A. there is no correlation between the dependent variables and the error term. B. there is a perfect correlation between the dependent variables and the error term. C. the sample size is less than the number of parameters in the model. D. there is no correlation between the independent variables and the error term.