Which of the following statements best describes the price, output, and profit conditions of monopolistic competition?
a. Price will equal marginal cost at the profit-maximizing level of output; profits will be positive in the long-run.
b. Price will always equal average variable cost in the short run and either profits or losses may result in the long run.
c. Marginal revenue will equal marginal cost at the short run, profit-maximizing level of output; in the long run, economic profit will be zero.
d. Marginal revenue will equal average total cost in the short run; long-run economic profits will be zero.
c
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High-income industrial nations such as the United States and Japan tend to have their highest tariffs in
A) newer, high-technology manufacturing industries. B) capital-intensive, diversified manufacturing. C) agriculture, clothing, and textiles D) Both A and B. E) None of the above.
The principal-agent problem:
A. is caused by the principal having imperfect information about the agent. B. is caused by the principal being unable to perfectly observe the actions of the agent. C. arises from an imbalance of information. D. All of these statements are true.
Which of the following is a drawback of a floating exchange-rate system?
A. Adverse foreign trade shocks are especially damaging since any intervention by the central bank adds to the recession. B. Overshooting of exchange rates may cause excessive resource shifts into and out of trade-oriented industries. C. Inflation is fully transmitted from one country having a higher rate of inflation to another one having a lower rate. D. Monetary policy is ineffective in raising aggregate demand since it cannot be directed toward achieving internal balance.
Starting from long-run equilibrium, an increase in autonomous investment results in ________ output in the short run and ________ output in the long run.
A. lower; potential B. higher; higher C. lower; higher D. higher; potential