A contractionary fiscal policy will reduce a government budget deficit or increase a government budget surplus and lower the quantity of bonds the government must sell.

Which of the following statements best describes firms under monopolistic competition?

a. There is little price or quality competition. b. The firms compete, using quality, location, advertising, and price. c. Firms do not compete using advertising. d. There is little competition between firms.

Which of the following statements best describes the price, output, and profit conditions of monopolistic competition?

a. Price will equal marginal cost at the profit-maximizing level of output; profits will be positive in the long-run. b. Price will always equal average variable cost in the short run and either profits or losses may result in the long run. c. Marginal revenue will equal marginal cost at the short run, profit-maximizing level of output; in the long run, economic profit will be zero. d. Marginal revenue will equal average total cost in the short run; long-run economic profits will be zero.