Suppose that A Cleaner World invents a new type of laundry detergent that has an ingredient that stops stains from setting into clothes. If the laundry detergent market is monopolistically competitive, explain what will happen to the price of its product in the short run. What will happen in the long run?
What will be an ideal response?
In the short run consumers will buy its detergent because it is perceived to be better than other detergents and A Cleaner World will earn positive economic profits. In the long run other detergents will put the stain-stopping ingredient into their detergent. This will shift A Cleaner World's demand curve to the left, decrease the quantity they sell, and decrease the price they can charge until economic profits will become zero.
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If the MPS is one-third, a $100 increase in net exports will
A) reduce real Gross Domestic Product (GDP) by $300. B) reduce real Gross Domestic Product (GDP) by $100. C) increase real Gross Domestic Product (GDP) by $300. D) increase real Gross Domestic Product (GDP) by $33.
For each of the following sets of supply and demand curves, calculate equilibrium price and quantity
a. QD = 1000 - P; QS = P b. QD = 1500 - 2P; QS = 100 + 2P c. QD = 2000 - 3P; QS = -300 + 3P
Refer to the diagram for a natural monopolist. If a regulatory commission set a maximum price of P 1 , the monopolist would produce output:
A. Q 2 and realize a normal profit.
B. Q 4 and realize a normal profit.
C. Q 3 and realize an economic profit.
D. Q 4 and realize a loss.
With a closed economy and no government spending, the total demand for output is equal to ________
A) consumption per-worker plus investment per-worker B) consumption per-worker minus investment per-worker C) consumption per-worker times investment per-worker D) consumption per worker divided by investment per-worker