Rick buys a 1966 Mustang for $3,000 . planning to restore and sell the car. He goes on to spend $9,000 restoring the car. At this point he can sell the car for $10,000 . As an alternative, he can spend an additional $3,000 replacing the engine. With a new engine the car would sell for $13,000 . Rick should
a. complete the repairs and sell the car for $13,000.
b. sell the car now for $10,000.
c. never try such an expensive project again.
d. be indifferent between (i) selling the car now and (ii) replacing the engine and then selling it.
d
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A monopolistically competitive market
a. usually has too many firms, reducing the economic profit of each firm to zero. b. usually has too few firms, reducing the product variety for consumers. c. may have too many or too few firms, and the government can intervene to achieve the optimal number of firms. d. may have too many or too few firms, but the government can do little to rectify the situation.
The inflationary gap is the
A. inflation rate that will occur from excess aggregate demand. B. budget deficit that caused the inflation to occur. C. distance between the equilibrium level of output and the full employment level of output. D. gap between expected and actual inflation.