If economic profits are zero, then the entrepreneur can go elsewhere and do better

Suppose a deposit in New York earns 6 percent a year and a deposit in London earns 4 percent a year. Interest rate parity holds if the

A) U.S. dollar appreciates by 2 percent a year. B) U.S. dollar depreciates by 2 percent a year. C) U.K. pound depreciates by 2 percent a year. D) None of the above answers is correct because interest rate parity requires that the interest rates be the same in both countries.

In monopolistic competition, profits well in excess of costs are unlikely because _____.

(A) Customers always return to the product that is least expensive, even if the quality of that product is much lower. (B) Established rivals and new firms would lure customers away with slightly different and/or cheaper products. (C) Excess output can be maintained only for short periods. (D) Nonprice competition only works for the short term.