881. An example of an expansionary monetary policy is ?
A. a reduction in the taxes banks pay on their profits.
B. an increase in the required reserve ratio
C. an increase in the discount rate
D. the Central bank buying government securities in the open market

882. If the investment demand curve is vertical ?
A. both monetary and fiscal policy are ineffective
B. monetary policy is effective but fiscal policy is ineffective
C. monetary policy is ineffective but fiscal policy is effective
D. both monetary and fiscal policy are effective

883. Which of the following products is least likely to be sold in a monopolistically competitive market ?
A. breakfast
B. cotton
C. video games
D. beer

884. In the short run, if the price is above average total cost in a monopolistically competitive market, the firm makes ?
A. losses and firms exit the market
B. profits and firms exit the market
C. losses and firms enter the market
D. profits and firms enter the market

885. Which of the following firms has the least incentive to advertise ?
A. a manual fracture of breakfast cereal
B. a wholesaler of crude oil
C. a restaurant
D. a manufacturer of home heating and air conditioning

886. One source of inefficiency in monopolistic competition is that since price is above marginal cost, some units are not produced that buyers value in ?
A. Since price is above marginal cost surplus is redistributed from buyers to sellers
B. monopolistically competitive firms earn economic profits in the long run
C. monopolistically competitive firms produce beyond their efficient scale
D. excess of the cost of production and this causes a deadweight loss.

887. The use of word “competition” in the name of the market structure called “monopolistic competition” refers to the fact that ?
A. there are many sellers in a monopolistically competitive market and there is free entry and exit in the market just like a competitive market
B. Monopolistically competitive firms face a downward-sloping demand curve just like competitive firms.
C. Monopolistically competitive firms charge prices equal to the minimum of their average total cost just like competitive firms.
D. The products are differentiated in a monopolistically competitive market just like in a competitive market.

888. Which of the following firms is most likely to spend a large percentage of their revenue on advertising ?
A. the producer of a highly differentiated consumer product
B. the manufacturer of an undifferentiated consumer commodity
C. a perfect competitor
D. The manufacturer of an industrial product
E. The producer of a low-quality product that costs the same to produce as a similar high-quality product

889. Which of the following is not put forth as a criticism of advertising and brand names ?
A. Advertising manipulates people’s tastes to create a desire that otherwise would not exist
B. Advertising increase competition Which causes unnecessary bankruptcies and layoffs.
C. Advertising increases brand loyalty causes demand to be more inelastic and thus, increase mark-up over marginal cost.
All of these answers are criticisms of advertising and brand names

890. X inefficiency occurs when ?
A. The price is greater than the marginal cost
B. The price is greater than the average cost
C. Costs are higher than they could be due to a lack of competitive pressure
D. There are external cost


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