Gasoline is a normal good. If the price of gasoline falls, a consumer buys more gasoline because of
A) only an income effect.
B) only a substitution effect.
C) an increase in the marginal rate of substitution.
D) both an income effect and a substitution effect.
D
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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.
A learning curve may be stated as L = A + BN-b where L is the labor per unit and N is the cumulative number of units produced. Learning does not occur when
A) b = 0 B) b = 1 C) b > 0 D) b < 0