In the long run, if some monopolistically competitive firms are earning economic losses then
A) firms will leave the industry.
B) raise prices until they earn economic profits.
C) they will increase production until marginal costs fall.
D) new firms will enter the industry.
Answer: A
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The price elasticity of supply equals the percentage change in the
A) quantity demanded divided by the percentage change in the price of a substitute or complement. B) quantity supplied divided by the percentage change in price. C) quantity demanded divided by the percentage change in price. D) supply divided by the percentage change in the demand. E) quantity supplied divided by the percentage change in the quantity demanded.
In the above figure, the economy is initially at point B. If the Fed decreases the quantity of money, there is
A) a movement to point C. B) a movement to point A. C) a shift to AD2. D) a shift to AD1.
If an upstream monopoly and a downstream monopoly vertically integrate into a profit-maximizing monopoly, then the total amount of deadweight loss in the industry
A) will increase. B) will decrease. C) will remain unchanged. D) cannot be determined.
Producer surplus is the
A. area under the supply curve to the left of the amount sold B. area under the supply curve to the right of the amount sold C. amount the seller is paid plus the cost of production D. amount the seller is paid less the cost of production E. cost to sellers of participating in a market