What are the distinguishing characteristics of monopolistic competition?
What will be an ideal response?
The distinguishing characteristics of monopolistic competition are: i) a large number of firms, each producing a differentiated product than its competitors, ii) firms compete on quality, price, and marketing, and iii) there are no barriers to entry into the industry.
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Classical macroeconomic theorists believed that if the economy was in a slump, the government should ________.
A. increase spending B. maintain a balanced budget C. lower taxes D. print money
Suppose that marginal revenue for a perfectly competitive firm is $20 . When the firm produces 10 units, its marginal cost is $20, its average total cost is $22, and its average variable cost is $17
Then to maximize its profit in the short run, the firm A) should stay open and incur an economic loss of $20. B) must increase its output to increase its profit. C) must decrease its output to increase its profit. D) should shut down. E) should not change its production because it is already maximizing its profit and is making an economic profit.
Recently, the State of Tennessee discovered chemical compounds in their drinking water which may cause cancer. Since Tennessee's drinking water comes from the Pigeon River in North Carolina, the source of these chemicals is the waste discharges of industrial paper plants in North Carolina. This is an example of a(n):
a. external cost imposed on the citizens of Tennessee by the industrial plants of North Carolina. b. market failure where the market price of the output of these industrial plants does not fully reflect the social cost of producing these goods. c. externality where the marginal social costs of producing these industrial goods differ from the marginal private costs. d. all of these.
Fiscal policy is government action to influence aggregate demand and in turn to influence the level of real GDP and the price level, through:
a. expanding and contracting the money supply. b. regulation of net exports. c. changes in government spending and/or tax revenues. d. encouraging businesses to invest.