Monopolistic competition is characterized by excess capacity because:
A. firms charge a price that is less than marginal cost.
B. firms produce at an output level less than the least-cost output.
C. the demand for a product is perfectly elastic in this type of industry.
D. firms are always profitable in the long run.
Answer: B
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If firms find that consumers are purchasing less than expected, which of the following would you expect?
A) The economy will adjust to macroeconomic equilibrium as inventories rise, and production and employment rise. B) Aggregate expenditure will likely be greater than GDP. C) The economy will adjust to macroeconomic equilibrium as inventories fall, and production and employment rise. D) Aggregate expenditure will likely be less than GDP.
Which of the following is NOT a factor that determines the price elasticity of demand?
A) the amount that suppliers have made available B) the percentage of a consumer's total budget spent on the good C) the existence of substitutes D) the length of time allowed for adjustments to change in the price of the commodities
The natural rate of unemployment
a. is the least controversial of the Fed's economic barometers b. has remained constant over periods of varying rates of inflation c. is defined as the lowest level of unemployment that can be sustained without putting inflationary pressures on the economy d. in the U.S. is thought to be twice the level of Europe's natural rate of unemployment e. was a mandate of the Humphrey-Hawkins Act
Full employment implies which of the following is reduced to zero?
a. cyclical unemployment only b. frictional unemployment only c. frictional and structural unemployment only d. frictional, structural, and cyclical unemployment