Why would economies of scale be a barrier to entry?
What will be an ideal response?
If significant economies of scale exist in an industry, then the long-run average costs can decline over a wide range of output rates so that it may not be profitable for more than one firm to exist in that industry. This is the case of a natural monopoly, which is able to underprice potential competitors and keep them out of the market.
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In the money market, in the short run in order to decrease the nominal interest rate, the Fed must
A) increase the discount rate. B) increase the quantity of money. C) decrease the quantity of money. D) decrease the demand for money. E) directly lower the interest rate and not change either the demand for money or the supply of money.
In the above figure, Brendan originally consumes at point A. If his income falls and compact discs are a normal good but haircuts are an inferior good then he will begin consuming at a point such as
A) B. B) E. C) F. D) G.