What is the trade-off that consumers face when buying the product of a monopolistically competitive firm?
A) Consumers pay higher prices but receive better quality goods compared to the output of perfectly competitive firms.
B) Consumers pay a price greater than marginal cost, but have the luxury of choices more suited to their tastes.
C) Consumers pay higher prices but the products are produced by highly efficient firms.
D) Consumers pay lower prices but have fewer choices.
Answer: B
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A perfectly competitive market is characterized by a large number of small firms that produce a differentiated product
Indicate whether the statement is true or false
The activist response to the monetarist platform says that
A) private spending may show some stability, but monetary or fiscal policy designed to stabilize it will just make things worse. B) private spending is stable partly because consumption spending is based on permanent income. C) even if prices are not completely flexible in the short-run, given time there is enough flexibility for the system to return to the natural level of real GDP. D) None of the above.
If a government has an active surplus and is below full employment, then:
a. The actual deficit must be less than the passive deficit. b. The actual deficit must be greater than the passive deficit. c. The actual deficit must be greater than the active surplus. d. Fiscal policy must be stimulatory and moving the nation closer to full employment.
If a seafood restaurant can raise the price of its fried shrimp without losing all of its customers, then the restaurant definitely
A.) has market power B.) Is experimenting economies of scale C. Is using predatory pricing D. has a monopoly