Suppose that you have noticed that almost all of the car dealers in your city are located along a three-block stretch of the same street. A likely reason for this clustering of car dealers is that:
A. there is a social norm in that city that dealers follow in choosing location.
B. each dealer is attempting to locate closest to the customers.
C. each dealer sells a different brand of car, so they are not competitors and do not have to be concerned about the other dealers' locations.
D. the dealers are better able to form a cartel.
Answer: B
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A monopolistically competitive firm chooses
A) the price of the product it sells but market forces determine the quantity it will be able to sell. B) the price of the product it sells but the quantity of output to produce is agreed upon by all firms in the industry. C) both the quantity of output to produce and the price at which it will sell its output. D) the quantity of output to produce but the price of the product it sells is determined collectively by all firms in the industry.
Consider the following ratio: the average annual inflation rate/the average annual money growth rate. A country with a ratio less than one would have:
A. to have a high unemployment rate. B. an economy suffering from a recession. C. an average inflation rate less than the average rate of money growth. D. an average inflation rate greater than the average rate of money growth.