The firms in a monopolistically competitive industry are ning positive economic
ID: 1128053 • Letter: T
Question
The firms in a monopolistically competitive industry are ning positive economic profits. What would we expect to happen as a result? a. New firms will enter the industry until zero economic profits are being eaned b· The firms will continue to earn positive economic profits indefinitely, because ofbarriers to entry c. New firms will enter the industry until negative economic profits are being eaned d. Firms will exit the industry until zero economic profits are being earned e. None of the above. 2. Total fixed cost a. increases as quantity increases. b. c. d. e. is a constant. decreases as quantity increases. is represented graphically by a horizontal line. (b) and (d) are both correct. 3. If we want to understand the overall distribution of income, which of the following would be the most important to understand? a. The distribution of unemployment-insurance payments. b. The distribution of royalties. c. The distribution of dividends. d. The distribution of earnings in the labor market. e. None of the above: None of these has anything to do with the overall distribution of income. 54. All else equal, an increase i distribution of labor-market in the earnings, and an increase in the supply of highly skilled labor will lead to in the distribution of labor-market earmings a. greater inequality, greater inequality b. greater inequality, less inequality c. less inequality, greater inequality less inequality, less inequality e. not enough information has been given to answer the question KEEP GOING: REMEMBER TO ANSWER ALL 60 QUESTIONS.Explanation / Answer
51. Under monopolistically competitive industry firms earn super normal profit because of product differentiation. Because of profit, firms may enter the market but its not like that existing firm would start making losses or economic profit will turn to break even. It will continue even if new firms enter or dont enter.
Hence none of the baove option is fit. Option e is correct.
52. Fixed cost does not vary with change in output level hence named as fixed cost. It remains constant ta all level of output. And hence represented as a horizontal line . Option e is correct.
53. Distribution of income coluld be signified as income of labors. hence option d is correct.
54. HIgher demand will increase wage and skill labors laready earn higher wages. When demand increases of skill labors theor wage increases more this will make the income distribution more unequal.
Higher supply reduces wage and if skill labors supply increases the would get lesser wage than earlier to which the gap between their and less skilll labors will reduce. Hence reducing the unequal distribution.
Hence option b is correct.
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