Starting from long-run equilibrium, a large decrease in government purchases will result in a(n) ________ gap in the short-run and ________ inflation and ________ output in the long-run.

"Unlike a monopoly, consumer surplus in a perfectly competitive market is zero." Do you agree or disagree? Why?

What will be an ideal response?

Monopolistically competitive firms have excess capacity. To maximize profits, firms will

a. increase their output to lower their average total cost of production and eliminate the excess capacity. b. produce where price equals marginal cost to eliminate the excess capacity. c. produce where average revenue equals marginal cost to eliminate the excess capacity. d. maintain the excess capacity.