The product-variety externality arises in monopolistically competitive markets because
a. firms produce with excess capacity.
b. firms try to differentiate their products.
c. firms would like to produce homogeneous products, but the large number of firms prohibits it.
d. entry and exit is restricted.
b
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According to the text, the 17 countries with high degrees of economic freedom
A) account for 81 percent of total world output. B) account for less than 25 percent of total world output. C) have the weakest economies. D) have low productivity.
Crowding out occurs when
a. investment declines because a budget deficit makes interest rates rise. b. investment declines because a budget deficit makes interest rates fall. c. investment increases because a budget surplus makes interest rates rise. d. investment increases because a budget surplus makes interest rates fall.
Use the following graph to answer the next question.
At its short-run equilibrium, this pure monopoly generates ________.
A. a loss B. an economic profit C. zero revenue D. a normal profit
The effect of higher prices from the domestic sugar beet program in the United States is:
A. Economically efficient because it maintains the income of sugar beet farmers and reduces potential unemployment costs B. That it discourages the production of sugar beets in the United States because businesses cannot afford to use sugar beets in production C. That it increases exports of sugar beets from the United States to other nations D. "Regressive" because low-income households spend a larger percentage of their income on food than do high-income households