The monopolistic competitive firm in short-run equilibrium may experience economic profits that are
A) always zero.
B) greater than, equal to, or less than zero.
C) always positive.
D) always negative.
B
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Refer to the above figure. An increase in aggregate demand beyond real Gross Domestic Product (GDP) level Y1 would result in
A) a lower price level and an increases in real GDP. B) higher real GDP but not a higher price level. C) a lower price level but no change in real GDP. D) a higher price level but no change in real GDP.
If a typical firm in a perfectly competitive industry is earning profits, then
A) new firms will enter in the long run causing market supply to increase, market price to fall, and profits to decrease. B) all firms will continue to earn profits. C) the number of firms in the industry will remain constant in the long run. D) new firms will enter in the long run causing market supply to decrease, market price to rise, and profits to increase.