Graded Quiz Unit 6
14 May - 20 May
The market for plumbing services in a city can be characterized by the model of monopolistic
competition. Suppose that the market is initially in long-run equilibrium, and then there is an
increase in demand for plumbing services. We expect that in the long run:
a. firms will leave the plumbing market.
b. there will be a short-run increase in the number of firms, but then the number will return
to the original level.
c. new firms will enter the plumbing market. Correct
d. firms will shut down, but they will not leave the industry.
The correct answer is: new firms will enter the plumbing market
If the CPI is 120 in 2005 and 150 in 2006, what is the rate of inflation over this period?
The XYZ Company is a profit-maximizing firm with a monopoly in the production of pennants.
The firm sells its pennants for $10 each. We can conclude that the XYZ Company is producing
a level of output at which: