Verizon has a monopoly over local telephone service. If Verizon is producing where marginal revenue is greater than marginal cost, the firm
A. is maximizing profits.
B. must be earning zero profit.
C. could increase profits by increasing output.
D. could increase profits by reducing output.
Answer: C
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In the long run, monopolistically competitive firms can make an economic profit because of product differentiation
Indicate whether the statement is true or false
The idea that nominal variables are heavily influenced by the quantity of money and that money is largely irrelevant for understanding the determinants of real variables is called the
a. velocity concept. b. Fisher effect. c. classical dichotomy. d. Mankiw effect.
The creation of savings plans such as savings deposits and money market mutual accounts that allow easy transfer of funds between interest-earning assets and checkable deposits tends to
A) lower the cost of holding money. B) reduce the demand for money. C) increase the demand for money. D) increase the risk of holding money.
Suppose the supply of product X is perfectly inelastic. If there is an increase in the demand for this product, equilibrium price:
A. will decrease but equilibrium quantity will increase. B. and quantity will both decrease. C. will increase, but equilibrium quantity will decline. D. will increase, but equilibrium quantity will be unchanged.