Suppose that firms in a monopolistically competitive industry are earning positive economic profits. In this situation, you would expect
A. the number of firms in the market to increase.
B. each firm will experience an increase in its demand.
C. there is a downward shift in the firm’s average cost curve.
D. to observe firms reducing their advertising.
Answer: C
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The most accurate procedure for finding out whether it is more efficient for a commercial airline to use 727s or 757s for its domestic flights is to
A) compare the fuel efficiency of 727s and 757s. B) compare the fuel efficiency and operating cost of 727s and 757s. C) compare the acquisition cost, operating cost, and fuel efficiency of 727s and 757s. D) compare the acquisition cost, operating cost, and fuel efficiency per passenger seat of 727s and 757s. E) see whether the airline has chosen to use 727s or 757s.
During a recession, rising transfer payments and falling tax collections
I. help cushion households from the impact of the recession. II. buffers the fall in real GDP (relative to a situation where transfer payments do not rise and tax revenues do not fall). III. tend to increase a budget deficit or reduce a budget surplus. A) I only B) I and II only C) II and III only D) I, II, and III