The market structure of monopolistic competition exists when
A) there are a small number of interdependent firms that constitute the entire market.
B) there is a single producer of a product.
C) there are many producers of differentiated products.
D) there are many producers of a homogeneous product.
Answer: C
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Refer to Figure 13-1. The marginal revenue from the increase in price from P0 to P1 equals
A) the area (A - D). B) the area (B + D - A). C) the area (C - B). D) the area A.
Suppose you were a forecaster of the real wage rate, employment, output, the real interest rate, consumption, investment, and the price level. A shock hits the economy, which you think is a temporary adverse supply shock
(a) What are your forecasts for each of the variables listed above (rise, fall, and no change)? (b) What if the shock was really due to people's reduced expectations about their future income. Which variables did you forecast correctly, and which did you forecast incorrectly?
An inelastic demand indicates that
A) quantity demanded does not vary with changes in the price. B) relatively small changes in price lead to relatively large changes in quantity demanded. C) relatively large changes in price are required to obtain a relatively small change in quantity demanded. D) relatively large changes in quantity demanded lead to relatively large changes in price.
If producers incorrectly set the price of their product too low:
A. a shortage will result. B. a surplus will result. C. equilibrium will result. D. the industry will die out soon.