Comment on the following statement: "The demand facing a firm in perfect competition is less elastic than the demand facing a firm in monopolistic competition."
What will be an ideal response?
The statement is false. Firms in perfect competition face a large number of perfect substitutes for their products. Thus, the demand facing a firm in perfect competition is perfectly elastic (horizontal). While firms in monopolistic competition face a number of close substitutes, they are the only producers of their particular products. This gives them some ability to set the prices of their products without losing all demand. Thus, the demand curve faced by a firm in monopolistic competition is downward sloping and less elastic than that faced by a firm in perfect competition.
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What does it mean when a "free lunch" is available? Relate your answer to the production possibilities frontier
What will be an ideal response?
Assume that a very unusual production process involves increasing marginal productivity that appears to have no end. What would the total productivity function look like? Comment on the likelihood of such a function in the real world
What will be an ideal response?
Suppose that imports and exports in an industry are $100 million and $200 million, respectively. Will the index of intra-industry trade for this industry rise, fall, or remain unchanged if exports fall to $100 million?
a. It will rise. b. It will fall. c. It will remain unchanged. d. There is not enough information to determine how the index will change.
A government is running a budget surplus if:
A. government revenue is less than government spending. B. imports exceed exports. C. government revenue exceeds government spending. D. exports exceed imports.