How do new Keynesians use menu costs to help explain price stickiness in the short run?
What will be an ideal response?
New Keynesian economists argue that prices will adjust only gradually in monopolistically competitive markets when there are costs to changing prices. The costs of changing prices include informing current and potential customers and remarking prices in catalogues and on store shelves. If potential profits are small relative to the cost of changing prices, the firm won't change its price.
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Use the following graph to answer the next question.
Which point is not on the perfectly competitive firm's short-run supply curve?
A. E B. F C. G D. H
All of the following are examples of human capital except:
A. physical strength. B. an eye for decorating and color. C. a PhD in chemistry. D. an automotive manual.
List five goods that are likely sold in a monopolistically competitive market
An increase in business inventories during a time period, ceteris paribus, will
A. Increase GDP during that period. B. Never affect GDP because changes in inventories are not included in the calculation of GDP. C. Not affect GDP during that period but will increase GDP in later periods when the inventory is sold. D. Decrease GDP during that period.