When a monopolistically competitive firm is in long-run equilibrium:
a. the demand curve will be perfectly elastic.
b. marginal cost must be falling.
c. price exceeds marginal cost.
d. marginal revenue exceeds marginal cost.
QUESTION 2The euro floats against other currencies, but the member nations of the euro have no separate national money. For this reason, Spain, that uses the euro as its currency is listed under the managed float arrangement.
a. True
b. False
Indicate whether the statement is true or false
QUESTION 3In a market characterized by many buyers and one seller, investment in informative advertising by a seller can ____ the price of a commodity to customers and lower their _____ cost of acquiring information.
a. decrease; sunk cost
b. increase; transaction cost
c. increase; sunk cost
d. decrease; transaction cost
QUESTION 4In the monopolistic competition model, the attribute of free entry suggests that:
a. all firms earn zero economic profits in the long run.
b. some firms will be able to earn economic profits in the long run.
c. some firms will be forced to incur economic losses in the long run.
d. the market structure will eventually be characterized by perfect competition in the long run.
QUESTION 5When an exchange rate is established as a fixed peg, active intervention may be required to maintain the target-pegged rate.
a. True
b. False
Indicate whether the statement is true or false
QUESTION 6Suppose the cost of producing cellular phones declines from 25 to 20 . If buyers' valuations remain fixed at 30, the transaction would create _____ more economic value.
a. 10
b. 5
c. 2
d. 15
QUESTION 7Due to the entry and exit of firms in a monopolistically competitive market:
a. economic profits and economic losses are dissipated in the long run.
b. economic profits persist in the long run, but not economic losses.
c. economic losses will exist in the long run, but not economic profits.
d. both economic profits and economic losses exist in the long run.
Quick Reply
