Which of the following most closely approximates the conditions of a monopolistically competitive market?
A. The market for Grade A eggs, which is characterized by a large number of firms producing a homogeneous product.
B. The restaurant industry, which is characterized by firms producing a differentiated product in a market with low entry barriers.
C. Local cable television service, where a licensed supplier competes with firms offering satellite service.
D. The market for jumbo aircraft, where one major domestic firm competes with one major foreign firm.
Answer: B
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Use the following graph to answer the next question.
If AD1 shifts to AD2, then the equilibrium output increases from ________.
A. Q1 to Q2 while the price level rises from P1 to P2 B. Q1 to Q2 while the price level falls from P2 to P1 C. Q1 to Q3 while the price level rises from P1 to P2 D. Q1 to Q3 while the price level falls from P2 to P1
An increase in the income tax rate ________ the value of the tax multiplier
A) decreases B) increases C) has no effect on D) may increase or decrease
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A) a legal; exceeds the B) an illegal; exceeds the C) a legal; is less than the D) an illegal; is less than the E) an illegal; equals
In the IS-LM-BP model, when the price variable decreases, the
A) LM curve shifts out. B) IS curve shifts out. C) LM curve shifts in. D) BP curve shifts up.