In contrast with perfect competition, excess capacity characterizes monopolistic competition. Excess capacity is due to which of the following?
A) Monopolistically competitive firms face downward-sloping demand curves. In the long run, firms produce where their demand curves are tangent to their long-run average total cost curves.
B) Monopolistically competitive firms produce at the minimum point on their average total cost curves.
C) Monopolistically competitive markets have low barriers to entry.
D) Monopolistically competitive firms produce where marginal revenue is equal to marginal cost.
Answer: A) Monopolistically competitive firms face downward-sloping demand curves. In the long run, firms produce where their demand curves are tangent to their long-run average total cost curves.
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What will be an ideal response?
A public good or service can be consumed by paying and nonpaying customers alike
a. True b. False Indicate whether the statement is true or false
A quota is
A) a limit placed on the quantity of goods that can be imported into a country. B) a tax imposed by a government on goods imported into a country. C) a subsidy granted to importers of a vital input. D) a health and safety restriction imposed on an imported product.
Refer to the table below. If the equilibrium price increases, then the:
A. Producer surplus will decrease
B. Consumer surplus will increase
C. Producer surplus will increase
D. Allocative efficiency will increase