In monopolistic competition, free entry and free exit mean that in the long run firms in the industry make zero economic profit.
Indicate whether the statement is true or false
Ques. 2Describe the different possible profit outcomes for a perfectly competitive firm in the short run versus the long run. Explain why they occur.
What will be an ideal response?
Ques. 3Which of the following will result in the most deadweight loss?
A) a natural monopoly regulated with marginal cost pricing
B) an unregulated natural monopoly
C) a natural monopoly regulated with average cost pricing
D) All of the above result in the same deadweight loss.
Ques. 4If reckless drivers are more likely than safe drivers to buy automobile insurance, then a moral hazard problem has occurred.
Indicate whether the statement is true or false
Ques. 5Taxes and transfers in the United States
A) shift the Lorenz curve inward.
B) shift the Lorenz curve outward.
C) cancel out so that the Lorenz curve does not shift.
D) shift the Lorenz curve inward at low incomes, outward at high incomes.
Ques. 6In the short run, a firm in monopolistic competition produces where MR = MC.
Indicate whether the statement is true or false
Ques. 7When long-run average cost remains constant as output increases there are constant
A) marginal returns.
B) returns to scale.
C) economies of scale.
D) diseconomies of scale.
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