If Firms in a Monopolistically Competitive Industry Are Operating with Positive

question 295

Multiple Choice

If firms in a monopolistically competitive industry are operating with positive economic profit, over time we would see

• A) firms alter their advertising rates until they made at least normal profits.
• B) some firms entering the industry, causing the market supply curve to shift to the right, lowering price.
• C) some firms entering the industry, causing the demand curves of the existing firms to shift to the left.
• D) some firms entering the industry, causing the demand curves of the existing firms to shift to the right.

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Definitions:

Required Reserve Ratio

The proportion of depositors' balances banks must have on hand as cash, mandated by the central bank.

Excess Reserves

The reserves held by banks that are greater than the minimum amounts required by regulators, which can be lent out or invested.

Checkable Deposits

Bank account balances that can be withdrawn on demand using checks or electronic methods.

Money Supply

Refers to the total amount of money available in an economy at a particular point in time, including cash and deposits.