As Product Markets Become More Competitive and the Markup Decreases,we

question 14

Multiple Choice

As product markets become more competitive and the markup decreases,we would expect which of the following to occur?

• A)no change in the real wage in the medium run.
• B)an increase in the aggregate price level and an increase in output in the medium run.
• C)an increase in the interest rate in the medium run.
• D)no change in output in the medium run.
• E)an increase in the real wage in the medium run.

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Definitions:

Economic Profits

The variance between complete earnings and aggregate expenses, taking into account both overt and covert costs.

Downward-Sloping Demand

A market scenario where the quantity demanded by consumers decreases as the price of the good increases, illustrating the inverse relationship between price and demand.

Downward Sloping

Describes a line or curve on a graph that represents a decrease or decline in value as one moves from left to right.

Perfectly Competitive Firm

A perfectly competitive firm operates in a market where no single company can influence the price of its product, characterized by many sellers, homogeneous products, and free market entry and exit.