What is the source of market power for a monopolistically competitive firm?
Product differentiation, a key characteristic of a monopolistically competitive firm, provides it some market power or some ability to determine its own price. Therefore, the demand curve for a monopolistic competitor is based on the extent of its product differentiation and how many competitors it faces.
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Starting from long-run equilibrium, a large decrease in government purchases will result in a(n) ________ gap in the short-run and ________ inflation and ________ output in the long-run.
A. expansionary; lower; potential B. expansionary; higher; potential C. recessionary; lower; potential D. recessionary; lower; lower
Income taxes cause _____
a. individuals to substitute towards leisure b. individuals to substitute towards jobs with more in-kind benefits c. individuals to work in underground markets d. all of the above
Refer to the above table. What is the absolute price elasticity of demand when a price rises from $9 to $9.50?
A) 0.35 B) 0.55 C) 2.57 D) 2.85
During economic expansions, banks tend to lend less money because of higher interest rates
Indicate whether the statement is true or false