Why must long-run equilibrium in monopolistic competition occur at the point at which the demand curve is tangent to the average total cost curve?
What will be an ideal response?
If the demand curve cuts through the average total cost curve, the demand curve would be above the average cost curve at some levels of output. Producing at these levels of output would result in a positive profit. Positive profit would attract new firms, resulting in a leftward shift of the firm's demand curve. If the demand curve were always below the average cost curve, firms would be incurring losses and some would leave the industry, resulting in a shift of the demand curve to the right. For the industry to be in long-run equilibrium, firms must be earning zero economic profit. This means that the firm's demand curve must be tangent to its average total cost curve.
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Jim is planning on attending a football game. He spent $40 on the ticket. He will have to take the day off losing 8 hours of work. His hourly wage is $10 . He estimates it will cost him around $20 for gas and parking at the game. Jim's total economic cost of attending the game equals
a. $80 b. $40 c. $60 d. $140
Which of the following is not an activity of the Fed?
a. Making loans to the public b. Clearing banks' checks c. Lending funds to the Federal government d. Purchasing U.S. government securities e. Holding deposits of the U.S. Treasury