Which of the following is a distinction between perfectly competitive and monopolistic competition?
A. Perfectly competitive firms must compete with rival sellers; monopolistically competitive firms do not confront rival sellers.
B. Monopolistically competitive firms can raise their price without losing sales; perfectly competitive firms must lower their price in order to sell more of their product.
C. Perfectly competitive firms confront a perfectly elastic demand curve; monopolistically competitive firms face a downward-sloping demand curve.
D. Perfectly competitive firms may make either economic profits or losses in the short run, but monopolistically competitive firms always earn an economic profit.
Answer: C
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Suppose that the dollar real exchange rate falls by 10% against the euro, 20% against the pound, and 25% against the yen. If the United States trades equally with each country, what is the percentage decline in the real effective exchange rate?
a. 22.5% b. 18.3% c. 15.1% d. 20.3%
The interest rate is the opportunity cost of transferring spending power between time periods. However, the market mechanism may fail to provide adequately for future economic growth. List the reasons why a market might fail.
What will be an ideal response?