Figure 11.3Figure 11.3 shows demands and costs for a monopolistically competitive firm. When the firm's demand curve shifts from D1 to D2 and to D3:
A. the demand for the firm's product is decreasing.
B. the firm's average cost of production is increasing.
C. the firm's marginal revenue curve also shifts to the left.
D. All of these
Answer: D
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Suppose the market demand function in a certain market where Q is measured in thousands of units is Qd = 20 - 2.5P, and the market supply function is Qs = 2.5P - 7.5. How much deadweight loss would there be in this market if the quantity bought and sold was 6,000 units?
A. $0.03 B. $25 C. $500 D. $2,500
The amount of a product that people are willing and able to purchase at a specific price is referred to as the:
a. demand. b. quantity demanded. c. law of demand. d. consumption function. e. purchasing power.
In the calculation of aggregate income, the value added at each stage of production by each firm equals the firm's:
a. selling price minus payments for inputs. b. total costs minus the profits and interest payments. c. total fixed costs and the firm's average rate of return. d. appreciation in market value of all firms over the last year.
Which of the following correctly distinguishes an active versus passive policy approach?
a. An active policy approach is restricted to open-market operations by the Fed, while a passive policy approach includes changes in the required reserve ratio, and fiscal stimulus in the form of government spending. b. An active policy approach is used to close a contractionary gap, while a passive policy approach is used to close an expansionary gap. c. An active policy approach is based on monetary aggregate targets, while a passive policy approach is addressed to interest rate stability. d. An active policy approach is based on the notion that discretionary fiscal or monetary policy can reduce the costs imposed by an unstable private sector. A passive approach is based on the idea that discretionary policy contributes to the instability of the economy and thus is part of the problem.