As new firms enter a monopolistic competitive industry, it can be expected that:
A. market price will increase.
B. the output of existing firms will increase.
C. profits of existing firms will increase.
D. profits of existing firms will decrease.
Answer: D
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In the above figure, Brendan originally consumes at point A. If his income rises and both compact discs and haircuts are normal goods then he could begin consuming at point
A) B, C, or D. B) B. C) C. D) D.
According to the monetarist point of view
A. to avoid inflation, the Federal Reserve should create reserves at the same rate as the velocity of money. B. velocity of money is not constant; therefore, the increase in the money supply should not be constant. C. in the short run, increased unemployment and/or reduced inflation are the result of a reduction in the growth of the money supply. D. in the short run, changes in the money supply can have no effect on output in the economy, only on prices.