Which of the following is an assumption used when drawing a production possibilities frontier?
i. Human wants and desires are limited to what is available.
ii. Only two goods are considered.
iii. The level of technology is fixed and unchanging.
A) i only
B) ii only
C) i and iii
D) ii and iii
E) i, ii, and iii
D
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One of the assumptions of monopolistic competition is that firms produce differentiated products. What does this assumption imply about the demand curve facing a representative firm?
What will be an ideal response?
You have just opened a new Italian restaurant in your hometown where there are three other Italian restaurants
Your restaurant is doing a brisk business and you attribute your success to your distinctive northern Italian cuisine using locally grown organic produce. What is likely to happen to your business in the long run? A) If your success continues, you will be likely to establish a franchise and expand your market size. B) Your competitors are likely to change their menus to make their products more similar to yours. C) If you continue to maintain consistent quality, you will be able to earn profits indefinitely. D) Your success will invite others to open competing restaurants and ultimately your profits will be driven to zero.