How is a monopolistically competitive market similar to a perfectly competitive market? Do monopolistically competitive markets and monopolies share any common features?
What will be an ideal response?
Monopolistically competitive markets are similar to perfectly competitive markets in that there are no barriers or restrictions on the entry of firms into the market. Monopolists and firms under monopolistic competition face a downward-sloping demand curve and have the ability to set price.
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On a traditional supply and demand diagram,
A. price is measured along the horizontal axis and quantity along the vertical axis. B. price is measured along the vertical axis and quantity along the horizontal axis. C. quantity demanded is measured along the horizontal axis, quantity supplied is measured along the vertical axis, and price is indicated on the contour lines. D. quantity is measured along both axes and price is indicated on the contour lines.
Pedro, who knows nothing about construction, paid Benito to remodel a room in his house. Two years later, one wall in the remodeled room crumbled because Benito used poor-quality materials. This illustrates which economic problem?
a. adverse selection b. screening c. moral hazard d. signaling
Refer to Figure 2.3. At a price of $13 per CD, there would be:
A. excess supply of 30 thousand CDs.
B. excess demand of 10 thousand CDs.
C. excess supply of 60 thousand CDs.
D. excess demand of 60 thousand CDs.
A firm’s fixed costs are $10 million. It sets the price at $1800 per unit and has marginal costs of $1,000. What is the firm’s contribution margin?
a. ?$800 b. ?$300 c. ?$1800 d. ?$1000