When new firms choose to enter monopolistically competitive markets:
a. there must be little diversity of products in the market.
b. they are guaranteed economic profits upon entry.
c. some firms in the market must be making economic profits.
d. the demand curve faced by an established firm will shift to the right as a result.
QUESTION 2Given a one-year Canadian bond with a yield of 8 percent, what will be the U.S. investor's rate of return at maturity if the Canadian dollar appreciates 10 percent against the U.S. dollar?
a. 2 percent
b. 8 percent
c. 10 percent
d. 18 percent
e. 25 percent
QUESTION 3One possible reason for Wal-Mart's success is that centralized-decision making provides economies of scale that allow it to aggressively bargain down wholesale prices of standard consumer goods.
Indicate whether the statement is true or false
QUESTION 4If firms in a monopolistically competitive industry are making economic profits:
a. firms will likely be subject to regulation.
b. barriers to entry will be strengthened.
c. new firms will enter the market.
d. some firms must exit the market.
QUESTION 5What is the interest rate on a 12-month U.K. certificate of deposit if the dollar return on the certificate is 4 percent and the dollar has appreciated 9 percent against the British pound?
a. 15 percent
b. 13 percent
c. 9 percent
d. 5 percent
e. 4 percent
QUESTION 6A seller with market power has greater command over product price compared to a perfect competitor and is thus less enthusiastic in devising new ways to create economic value.
Indicate whether the statement is true or false
QUESTION 7A monopolistically competitive firm differs from a perfectly competitive firm in that a monopolistically competitive firm:
a. faces a downward-sloping demand curve for its product.
b. faces a horizontal demand curve at the market-clearing price.
c. is able to earn profits in the long run.
d. faces virtually no barriers to entry.
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