Describe how a firm’s revenues and profits are increased through product innovation. What three other points should be noted about these results?
What will be an ideal response?
Technological change can increase a firm’s profit by increasing revenues through product innovation. From a utility perspective, consumers will purchase a new product only if it increases total utility from their limited income. The purchases of the product increase the firm’s revenues.
Three other points are noteworthy about these results. First, consumer acceptance of a new product depends on both its marginal utility and its price. To be successful, a new product must not only deliver utility to the consumer but do so at an acceptable price. Second, many new products are not successful, so the firm may fail to realize the expected return. Third, most product innovations are small or incremental improvements to existing products and not major changes.
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In the long run, monopolistically competitive firms will not earn economic profits because
A) average total cost will shift up to meet the demand curve. B) input prices will be bid up. C) production will not be at minimum average cost. D) new firms will enter the industry.
The concentration ratio of an industry is a measure that captures the share of the industry’s total output that is produced by its four largest firms.
Answer the following statement true (T) or false (F)
Gross domestic product is the market value of all final goods and services produced in the economy of a given territory during a defined period of time
a. True b. False Indicate whether the statement is true or false
In the graph showing a reduction in the growth of the money supply, the natural rate of unemployment of the economy shown is ______.
a. 3 percent
b. 5 percent
c. 6 percent
d. 7 percent