Why can't a monopolistic competitor earn economic profits in the long run?
What will be an ideal response?
A monopolistic competitor may earn economic profits in the short run. In the long run, however, other firms will enter the market and produce substitutes for the product so that any economic profits earned by the existing firms will disappear due to competition. This means that the monopolistic competitor will earn zero economic profits in the long run.
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What causes capital and labor shares of gross domestic product to remain consistent over the years?
What will be an ideal response?
An economic model
a. uses equations to understand normative economic phenomena b. often omits crucial elements c. simplifies reality in order to focus on crucial elements d. tries to make simple concepts more complex e. cannot be proven wrong
A shift in the demand curve to the left, all other things unchanged:
A) will cause the supply curve to shift to the left, too. B) will cause a movement upward along the supply curve and a higher equilibrium price. C) will cause a movement downward along the supply curve and a lower equilibrium quantity. D) will result in a lower equilibrium price and greater equilibrium quantity.
A firm's total variable cost will depend on:
A. the level of output. B. the prices of variable resources. C. the production techniques that are used. D. all of these.