Question 31 In this exhibit (Profit Maximization for a Firm in Monopolistic Competition), suppose that an innovation reduces a firm's fixed costs and reduces cost from ATC to ATC' before the innovation reduced the cost, the firm's maximum economic profit was: a. $0. b. $30. c. $750. d. $4,500. Question 32 Following an income-compensated price change, you decide to decrease the quantity of ice cream purchased each month when the price increases and purchase more frozen yogurt instead. This is an indication of the: a. substitution effect. b. utility effect. c. income effect. d. consumption effect.

Exhibit: Monopoly Through Collusion Price, marginal revenue, marginal cost A P3 A P2 C MC P1 MR D = MR. D2 O Quantity per periodExhibit: Simultaneous Shifts in Demand and Supply Price per unit 52 D1 Quantity per periodExhibit: Figure 12-2 Price LRAS level SRAS, K K AD Y P Real GDP per year\fExhibit: The Supply of Videotape Rentals Price (a) Price (b) S S' CO 0 0 Quantity per period Quantity per period Price (C) Price S S Quantity per period 0 Quantity per period