How is the long-term result of entry and exit in a perfectly competitive market different from that in a monopolistically competitive market?
The long-term result of entry and exit in a perfectly competitive market is that all firms sell at the price level determined by the lowest point on the average total cost curve. Thus, perfect competition is productively efficient. However, in monopolistic competition, the end-result of entry and exit is that firms land on a price that lies on the downward-sloping portion of the average total cost curve rather than the very bottom of the average total cost curve. Thus, monopolistic competition is not productively efficient.
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Personal income taxes and transfer payments
A) acts as automatic stabilizers. B) magnify fluctuations in GDP. C) are discretionary fiscal policy tools only. D) are influenced by monetary policy.
Everything else held constant, if the tax-exempt status of municipal bonds were eliminated, then
A) the interest rates on municipal bonds would still be less than the interest rate on Treasury bonds. B) the interest rate on municipal bonds would equal the rate on Treasury bonds. C) the interest rate on municipal bonds would exceed the rate on Treasury bonds. D) the interest rates on municipal, Treasury, and corporate bonds would all increase.