Describe the three characteristics of an industry characterized by monopolistic competition.
What will be an ideal response?
POSSIBLE RESPONSE: Monopolistic competition describes an industry with the following three characteristics: First, for a general type of product, each of a number of firms produces a variant that consumers view as unique, so the product offering of each firm is differentiated from the product offerings of other firms. Consumers' perceptions of differences may be based on branding, physical characteristics, quality, effectiveness, or anything else that matters to the consumers. Each firm has some monopoly power based on its established production of its unique variety. At the same time, the variants of different firms are close substitutes for each other, so they can be analyzed together as part of a market for the general product. Second, there are some internal scale economies in producing a product variant. Third, there is easy entry and exit of firms in the long run.
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Which of the following least resembles a case of statistical discrimination?
A) Alphonso prefers not to hire anyone over the age of 55 because they tend to not have the technical computer skills he believes are necessary for his employees. B) Juliana hires only what she considers fit, healthy employees because she read that overweight employees miss more days of work due to health-related issues than do employees of average weight. C) Colleen, who is 6'2" in height, dislikes people under 6 feet tall and therefore only hires people who are at least as tall as she is. D) Tyrone believes that the Dutch have the best work ethic of all nationalities and therefore will hire someone of Dutch heritage over someone of any other nationality.
In comparison to an employer in a competitive labor market, a monopsony employer pays a ________ wage rate and hires ________ workers
A) lower; fewer B) lower; more C) higher; more D) higher; fewer
An example of a natural resource is:
A. Michael Jordan's athletic ability. B. Farmer Joe's farm fields. C. Bill Gates' revolutionary iPod. D. All of these are examples of natural resources.
The law of increasing opportunity costs states that:
A. Costs of production increase for one good, but costs decrease for the other good B. Increases in wages and other resource costs is what the increasing opportunity costs refer to C. Increases in the production of one good require larger and larger sacrifices of the other good D. Increases in the production of one good make the production of that good and easier