Answer the following statements true (T) or false (F)
1. Firms in monopolistic competition sell a similar but differentiated product.
2.
3.
4.
5.
1. TRUE
2. FALSE
3.
4.
5.
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When the price of a good is below its average variable cost, a perfectly competitive firm is better off ceasing production. In this case, it suffers a loss equal to its _____
a. fixed cost b. average variable cost c. marginal cost d. total variable cost
Refer to the accompanying table. If the price of a t-shirt is $6 and the price of a sweater is $80, then the rational spending rule is satisfied when the consumer purchases ________ t-shirts and ________ sweaters. UnitsUtils Per Year from T-shirtsUtils Per Year from Sweaters0001754002135720318096042101120
A. 4; 4 B. 3; 4 C. 4; 3 D. 4; 1
Individual accountability within the government bureaucracy:
A. tends to be greater than in private firms, making government more efficient than private firms. B. is not a problem because government bureaucrats are not affected by the self-interest that affects private sector individuals. C. is easy to monitor because of the small size and scope of government. D. tends to be lacking because of civil service protections and the complexity of government.
If firms receive an economic forecast predicting future decreases in the growth of real GDP, they are likely to respond by
A) increasing their level of investment spending to increase future production capacity. B) increasing their level of investment spending to increase current production capacity. C) decreasing their level of investment spending to decrease current production capacity. D) decreasing their level of investment spending to decrease future production capacity.