"A firm in monopolistic competition maximizes its profit by producing where its price is equal to its marginal cost." Is the previous statement correct or incorrect?
What will be an ideal response?
The statement is incorrect. A firm in monopolistic competition maximizes its profit by producing where its marginal revenue equals its marginal cost. Because the marginal revenue is less than the price for a firm in monopolistic competition, it definitely is not the case that the firm produces where its price equals its marginal cost!
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Assume the output market adjusts more rapidly than the asset market. A point of disequilibrium that is below both AA and DD will therefore initially result in
A) an increase in output. B) a decrease in output. C) a contraction of the money supply. D) a depreciation of the home currency. E) an appreciation of the home currency.
Purchasing goods produced in another country is the most common reason to
A. running a trade surplus. B. exporting to one country. C. investing in one country. D. exchange one currency for another.