The economic inefficiencies of monopolistic competition may be offset by the fact that:
A. advertising expenditures shift the average cost curve upward.
B. available capacity is fully utilized.
C. resources are optimally allocated to the production of the product.
D. consumers have increased product variety.
Answer: D
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An economy is at a short-run equilibrium as illustrated in the above figure. An appropriate fiscal policy option to move the economy to full employment is to
A) lower the interest rate by increasing the quantity of money and move the economy to a full-employment equilibrium at point b. B) increase government expenditure and move the economy to a full-employment equilibrium at point b. C) increase tax rates and move the economy to a full-employment equilibrium at point c. D) increase government expenditure and move the economy to a full-employment equilibrium at point c. E) increase tax rates and move the economy to a full-employment equilibrium at point b.
Monopolists always earn positive short-run economic profit
a. True b. False
A good's marginal social cost is defined as its
a. marginal private cost minus the value of any detrimental externality. b. incidental cost. c. marginal private cost plus the value of any taxes paid on its production. d. marginal private cost plus its incidental cost.
The difference between the earnings of construction workers who work on bridges and skyscrapers and those who work on highways is most likely due to
a. differences in unionization rates. b. a compensating differential. c. differences in education requirements. d. apprenticeship requirements.