The force that leads to zero economic profits for monopolistically competitive firms in the long run is:
a. excess capacity
b. price wars among firms.
c. new entry.
d. excessive advertising.
c
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Picture a competitive market with the usual upward sloping supply curve and downward sloping demand curve. If the current price is creating a shortage, then market forces will cause the price to adjust and
A. quantity supplied will increase. B. quantity demanded will increase. C. quantity supplied will decrease. D. demand will decrease.
Explain what increases in the price of oil have done to the exploration and extraction of oil from more costly sources of oil. What are some of these more costly sources of oil, and what happens to the quantity of proven oil reserves?
What will be an ideal response?
The strict crowding-out argument relies on the assumption that
a. the government must raise taxes to pay for spending, and the tax increase crowds out the stimulative effect of increased spending. b. the total flow of saving is a fixed amount. c. investment is invariant to interest rates, but very dependent on aggregate spending. d. consumption will rise to absorb most of an increase in income, and investment will accordingly fall.
Explain why the shape of the demand curve will determine how a shock to the market equilibrium affects price and quantity
What will be an ideal response?