Why don't some firms in monopolistic competition earn losses in the long run?
A) The firms have enough monopoly power to ensure they always earn profits.
B) Free entry allows enough firms to remain in the market and maintain the critical mass of firms required to attract customers.
C) Free exit implies that any unprofitable firms leave the market in the long run.
D) In the long run, firms will build enough brand loyalty among customers to ensure a profitable level of sales.
C
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The current account deficits incurred by the United States in the 1980s were caused, in the opinion of many economists, by
A) federal budget deficits. B) a sharp decline in private saving. C) "flight to quality" as foreign investors favored U.S. investments. D) Both B and C are correct.
The term that is used to refer to a situation in which one party to an economic transaction has less information than the other party is
A) asymmetric information. B) inefficient market hypothesis. C) information disparity. D) moral hazard.