Which of the following is true of monopolistic competition but is not true of perfect competition?
a. Each firm distinguishes its product from that of its competitors.
b. The firm engages in marginal cost pricing.
c. The firm produces at the point where average total cost is minimized.
d. There are significant barriers to the entry of new firms in the industry.
Ans: a. Each firm distinguishes its product from that of its competitors.
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Recently, Skooterville has experienced a large growth in population. As a result, the demand curve for telephone service in Skooterville:
A) has shifted to the right. B) has shifted to the left. C) has shifted down. D) Both B and C are correct. E) none of the above
Refer to the above figure. Which of the following statements is TRUE?
A) Under perfect competition, the efficient price is charged, which is the lowest price possible (P1 ) while under monopoly output is too large (Q4 ) and price is too high (P4 ). B) Under perfect competition price equals marginal cost (P3 ) while under monopoly price (P4 ) is greater than marginal cost (P1 ). C) The rate of output is the same under both monopoly and perfect competition (Q1 ), but price is higher under monopoly (P4 rather than P1 ). D) Price equals marginal cost under both monopoly and perfect competition, but output is too low under monopoly (Q1 instead of Q2 ).
To find the output at which the firm maximizes its profits you MUST know the firm's
A. average total costs. B. average variable costs. C. average fixed costs. D. marginal costs.
Phillip is a mortgage broker, who is paid by commission. When interest rates decline, he does a lot of business and earns a lot of money, as more people buy houses or refinance their mortgages. But when interest rates rise, business falls substantially. To diversify, Phillip should choose investments that
a. provide a higher return than the market average. b. provide a lower return than the market average. c. pay higher returns when interest rates rise and lower returns when interest rates fall. d. pay lower returns when interest rates rise and higher returns when interest rates fall.