The Economic Analysis of Monopolistic Competition Shows That Market Forces

question 130

Multiple Choice

The economic analysis of monopolistic competition shows that market forces eliminate profits in the long run.However, it is possible for a firm to continue to earn economic profits if the firm

• A)expands its marketing budget.
• B)adopts new technologies that enable it to lower its cost of production.
• C)expands its product offerings to appeal to a wider range of consumers.
• D)reduces its price to expand its market.

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Definitions:

Commodity Money

Money whose value comes from a commodity of which it is made, such as gold and silver, used historically as a medium of exchange.

Unit Of Account

A standard numerical monetary unit of measurement that provides a consistent way of quoting prices and conducting economic transactions.

M1

A category of the money supply that includes physical currency and coin, demand deposits, traveler's checks, and other checkable deposits.

Savings Deposits

accounts held at financial institutions that allow deposits and withdrawals and are subject to modest interest rates.