Explain how monopolistic ally competitive producers try to improve on the condition of just breaking even in the long run. Is this improvement a benefit for consumers?

What will be an ideal response?


Firms use product differentiation and product improvement as a long-run strategy to make their products significantly different from those produced by their rivals. The use of these tactics can make a product unique and tend to make the demand for the product more inelastic. They can also increase the demand for the product, which would increase the firm’s profits when costs remain constant or increase at a slower rate than revenues.
Product differentiation is achieved through differences in product quality and the introduction of new brands, types, styles, and other forms of non price competition. Product improvement encourages technological innovation and change that makes a product better over time.
Whether product differentiation and product improvement contribute substantially to more consumer welfare is a debatable question, and there are trade-offs. Consumers will enjoy more choice and variety in the selection of products under monopolistic competition, but it also creates more excess capacity and economic inefficiency.

Economics

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The Federal Reserve System is a government insurance agency that provides depositors in participating banks 100 percent coverage on their first $100,000 of deposits

Indicate whether the statement is true or false

Economics

If expected inflation is constant, then when the nominal interest rate falls, the real interest rate

a. falls by more than the change in the nominal interest rate. b. falls by the change in the nominal interest rate. c. rises by the change in the nominal interest rate. d. rises by more than the change in the nominal interest rate.

Economics

If you advertise and your rival advertises, you each will earn $4 million in profits. If neither of you advertises, you will each earn $10 million in profits. However, if one of you advertises and the other does not, the firm that advertises will earn $1 million and the non-advertising firm will earn $5 million. If you and your rival plan to be in business for 10 years, then the Nash equilibrium is:

A. for each firm to advertise every year. B. for neither firm to advertise in early years, but to advertise in later years. C. for each firm to advertise in early years, but not advertise in later years. D. for each firm to not advertise in any year.

Economics

Professional baseball teams in the United States use only wooden bats. If aluminum bats were permitted, the likely result would be a

A. shift in the supply curve for aluminum bats. B. shift in the supply curve for wooden bats. C. change in the quantity supplied of aluminum bats. D. persistent shortage of aluminum bats.

Economics