More specialization in a market economy generally leads to the more efficient use of its resources.

Consider a price searcher industry with high barriers to entry. In the short run, total revenues of the monopoly exceeds total costs. What will happen in the long run?

A. Nothing, because would-be rival firms are prohibited from entering the industry or find the start-up costs too costly to warrant the entrepreneurial risk to enter the industry. B. Many firms will enter the market and each firm will eventually operate at a loss. C. firm will be making just enough to cover per unit costs. D. Additional firms will enter the market, but the price will remain the same because the existing firms will not allow price to decrease.

In the above figure, suppose the economy is initially on the demand for money curve MD1. What is the effect of a fall in the nominal interest rate?

A) The demand for money curve would shift rightward to MD2. B) The demand for money curve would shift leftward to MD0. C) There would be a movement upward along the demand for money curve MD1. D) There would be a movement downward along the demand for money curve MD1.