Suppose a monopolist chooses to advertise its good and its own demand curve shifts to the right, then we know that
a. the industry's demand curve shifts in precisely the same way
b. its competitors share some of the benefits of the advertising
c. the monopolist's cost curves will shift to accommodate the shift in demand
d. the price of substitute goods will fall
e. consumers are turned off by the advertising and buy less at every price
A
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Explain the difference between induced consumption expenditure and autonomous consumption expenditure. Why isn't all consumption expenditure induced expenditure?
What will be an ideal response?
Suppose Robin's Clock Works produces in a perfectly competitive market. Suppose the average total cost of clocks is $95, the average variable cost of clocks is $90, and the price of clocks is $85. If the firm is producing the level of output where marginal cost equals price, then in the short run the firm:
A. should shut down. B. should continue to produce since total revenue exceeds total variable cost. C. is earning a positive economic profit. D. can increase profit by increasing output.