In the monopolistic competition model, firms earn zero economic profits in long-run equilibrium.
a. True
b. False
Indicate whether the statement is true or false
QUESTION 2Suppose a hefty rise in the demand for Mexican pesos creates a chronic shortage of this currency in the foreign exchange market. Which of the following steps should be adopted by the Mexican government to eliminate this shortage?
a. The government should impose a ban on Mexican exports.
b. The government should devalue the peso.
c. The government should print more pesos to increase its supply.
d. The government should allow the peso to appreciate.
e. The government should allow the peso to depreciate.
QUESTION 3In the long run, if new fringe firms with same cost structures as existing fringe firms enter the oligopoly market:
a. the dominant firm's ability to extract profit from the market decreases.
b. the fringe's ability to extract profit from the market decreases.
c. the fringe supply curve rotates leftward and downward.
d. the dominant firm's residual demand curve rotates rightward.
QUESTION 4If a monopolist's demand curve shifts to the left such that it becomes tangent to the ATC curve at the output for which marginal revenue equals marginal cost, the monopolist will make only a normal profit.
a. True
b. False
Indicate whether the statement is true or false
QUESTION 5In the long run, monopolistically competitive firms typically produce with allocative efficiency.
a. True
b. False
Indicate whether the statement is true or false
QUESTION 6Currency speculators are traders who seek to profit from a(n):
a. shift in global demand and supply patterns.
b. increase in the price of oil.
c. sudden shift in interest rates.
d. exchange rate change by selling the currency expected to appreciate and buying the currency expected to depreciate.
e. exchange rate change by selling the currency expected to depreciate and buying the currency expected to appreciate.
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