Assume that we are concerned about the existence of one firm (monopoly) in a market because of the potential for economic profits. If, however, there is free entry and exit, should our concerns change? Why or why not?
What will be an ideal response?
Yes. If a market is contestable the firm cannot use its monopolistic position because the profits will entice entry, which will force the firm to lower its price.
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Explain the combined effects of these events on U.S. real GDP and the price level, starting from a position of long-run equilibrium
What will be an ideal response?
The relative income hypothesis is associated with the ideas of
a. John M. Keynes b. Milton Friedman c. Franco Modigliani d. James Duesenberry e. Adam Smith
The benefits principle is often used to justify
a. the progressive income tax. b. a flat income tax. c. a regressive excise tax. d. earmarking the proceeds from taxes for specific public services.
When one person knows more than another, it creates a situation:
A. called information asymmetry. B. called information dominance. C. in which the transaction will not occur. D. in which the transaction is always regretted.