The monopolistically competitive firm's economic profits tend toward zero in the long run. Why is this so?
A) Monopolistically competitive firm's are rarely able to maintain the corporate discipline necessary to sustain profits in the long run.
B) If a monopolistically competitive firm is profitable for more than 2 years, the Justice Department orders a corporate restructuring to pull the company back to a normal rate of return.
C) In the long run, other firms will successfully offer substitutes for the profitable firm's product, and competition will eliminate economic profits.
D) Even though the monopolistically competitive firm can successfully maintain barriers to entry, keeping competition at bay becomes very expensive.
C
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The demand schedule for a commodity illustrates how the consumption of a commodity changes with changes in:
A) its price. B) tastes and preferences. C) supply. D) income.
If the aggregate price level ________, but nominal wages stay fixed, real wages ________
A) falls; fall B) rises; fall C) rises; remain fixed D) falls; remain fixed
Which of the following situations is NOT possible?
A) SAC and LAC are both increasing for some output levels. B) SAC is increasing but LAC is decreasing for some output levels. C) SAC is decreasing but LAC is increasing for some output levels. D) SAC and LAC are both decreasing for some output levels. E) All of the above are possible.
Who among the following benefits from inflation?
a. Patrick Roy who borrowed $10,000 from a bank to pay the downpayment on a house he bought in Denver b. The Denver National Bank who provided Patrick Roy with the $10,000 to make the downpayment c. Jerry Swanson, a landlord who holds a 5-year lease on an apartment rented to students off campus at the University of Arizona d. Peter Schran who loaned Larry Neal $500 without charging Larry any interest e. Ian McDonald who is retired and lives on his $700 per week pension