The amount of loans that a bank can create is limited by A) a ...

[melina_rosy]

The amount of loans that a bank can create is limited by
 
  A) a law enacted by Congress.
  B) the bank's excess reserves.
  C) a directive from the Federal Reserve System, which takes into account the bank's financial stability.
  D) the real interest rate.
  E) the bank's government securities.

Question 2

What type of profit can a firm in monopolistic competition earn in the long run? Explain your answer.
 
  What will be an ideal response?

[gcook]

Answer to Question 1

B

Answer to Question 2

In the long run, a firm in monopolistic competition can earn only zero economic profit, that is, a normal profit. It will not incur an economic loss in the long run because it will close. It cannot earn a positive economic profit because there are no barriers to entry. So if a firm in monopolistic competition is earning an economic profit, in the long run new firms enter the market, produce a similar product, and decrease the demand for the initial firm's product. Entry continues until the firms earn zero economic profit, so its owners make a normal profit.

[melina_rosy]

Gracias!

[ghepp]

Excellent