Assume the firms in a monopolistically competitive industry initially are earning positive economic profits. Which of the following will not occur over? time?
A) The firms' economic profits will be reduced.
B) New firms will enter.
C) Demand for the existing firms' output will become more inelastic.
D) The number of substitutes available in the industry will increase.
Ans: C) Demand for the existing firms' output will become more inelastic.
You might also like to view...
Define a sole proprietorship
What will be an ideal response?
Consider a society consisting of just a farmer and a tailor. The farmer has 10 units of food but no clothing. The tailor has 20 units of clothing but no food. Suppose each has the utility function U = F ? C. The price of clothing is always $1
If the price of food is $3, does a competitive equilibrium exist? If not, what will happen to the price of food?
According to the interest rate effect, an increase in the price level, if other factors are held constant, will lead to
A) a reduction in total real spending on interest-rate-sensitive goods. B) an increase in the stock of real wealth held by the public. C) an outward shift of the aggregate demand curve. D) an increase in the real interest rate.
If consumers view cappuccinos and lattés as substitutes, what would happen to the equilibrium price and quantity of lattés if the price of cappuccinos falls?
a. Both the equilibrium price and quantity would increase. b. Both the equilibrium price and quantity would decrease. c. The equilibrium price would increase, and the equilibrium quantity would decrease. d. The equilibrium price would decrease, and the equilibrium quantity would increase.