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Author Question: Pirates have been intensely attacking ships off the shore of Somalia this year. Boat owners have ... (Read 91 times)

folubunmi

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Pirates have been intensely attacking ships off the shore of Somalia this year. Boat owners have reportedly coughed up more than 30 million in ransom and insurance premiums have shot up.
 
  The pirate activity and increase in premiums means that the expected wealth of boat owners who sail near Somalia is ________. A) decreasing
  B) increasing
  C) staying the same
  D) decreasing only if they have insurance

Question 2

How does a firm in monopolistic competition determine its price and quantity? What type of profit can it make in the short run and the long run?
 
  What will be an ideal response?



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allisonblackmore

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Answer to Question 1

A

Answer to Question 2

The firm produces where its marginal cost equals its marginal revenue. Then the price is determined from the demand curve and is the highest price at which people will buy the quantity produced. The firm can make a positive economic profit, zero economic profit, or incur an economic loss in the short run. In the long run, the firm cannot make an economic profit; it can only make zero economic profit, that is, its owners make a normal profit.





 

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