Paul the Pizza Man used a new method to streamline pizza assembly that allowed him to make more pizzas and thus make greater revenue. Paul began to earn positive economic profits. In the long run, Paul will
a. continue to earn economic profits
b. earn zero economic profits because other pizza places will begin to use his system
c. continue to earn economic profits because Paul will get a patent on his new method
d. earn negative economic profits because innovators always loose money
e. earn zero economic profits because the government does not allow monopolistically competitive firms to earn economic profits
B
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When the government borrows funds in order to pay for its current expenditures,
a. the government will have to repay the borrowed funds within five years. b. the government can spend without having to increase taxes, either now or in the future. c. future taxes will have to be higher in order to pay the interest on the borrowed funds. d. the cost imposed on the private sector is virtually eliminated because taxes can remain constant.
Firms in perfectly competitive markets who wish to maximize profits should produce:
A. less as long as marginal cost is less than marginal revenue. B. more as long as marginal cost is greater than marginal revenue. C. at the level where marginal cost equals marginal revenue. D. All of these are true.