It has been argued that a monopolistically competitive industry involves "waste" because
A) there is too much product differentiation making shelves too crowded.
B) they end up producing to the right of the minimum of the average total cost curve and the price is below the marginal cost.
C) the firms do not equate marginal cost to marginal revenue to find the profit maximizing price and output.
D) the firms do not produce at the minimum of the average total cost curve and price is above marginal cost.
D
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In September 2012 the U.S. unemployment rate was 7.8 percent while the natural unemployment rate was 6 percent. The U.S. economy
A) had a negative output gap. B) had a positive output gap. C) had an output gap of zero. D) was at full employment.
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The "Greenspan doctrine"—central banks should not try to prick bubbles—was based on which of the following arguments?
A) Asset-price bubbles are nearly impossible to identify. B) Monetary actions would be likely to affect asset prices in general, rather than the specific assets that are experiencing a bubble. C) Raising interest rates has often been found to cause a bubble to burst more severely. D) Monetary policy actions to prick bubbles can have harmful effects on the aggregate economy. E) All of the above.