Explain why firms in monopolistic competition have excess capacity in the long run
What will be an ideal response?
A firm's efficient scale of production is the level of production where average total cost is at a minimum. In the long run, monopolistically competitive firms do not produce where ATC is at the minimum. They would need to increase output to reach this point. But if they did so, their profit would decrease. So for firms in monopolistic competition, the profit-maximizing output is less than the efficient scale.
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Consider two oligopolistic industries selling the same product in different locations. In the first industry, firms always match price changes by any other firm in the industry
In the second industry, firms always ignore price changes by any other firm. Which of the following statements is true about these two industries, holding everything else constant? A) Market prices are likely to be the same in both markets because they are both oligopolistic markets. B) No conclusions can be drawn about the pricing behavior under these very different firm behaviors. C) Market prices are likely to be lower in the first industry where firms always match price changes by rival firms than in the second where firms ignore their rivals' price changes. D) Market prices are likely to be higher in the first industry in which firms always match price changes by rival firms than in the second where firms ignore their rivals' price changes.
. In what year did the U.S. inflation rate drop drastically to close to –11%?
a. 1917 b. 1921 c. 1929 d. 1945
Tax loopholes serve to
a. improve the incomes of the poor. b. erode the progressivity of the income tax. c. increase the progressivity of the income tax. d. decrease work incentives for the poor.
which of the following is a private owner prohibited from doing?
What will be an ideal response?