How do the characteristics of perfect competition and monopolistic competition differ?
What will be an ideal response?
In monopolistic competition, the products sold are similar but differentiated, thereby enabling firms to compete on the basis of product development and marketing to further differentiate their products. In perfect competition the products are identical, thereby eliminating the opportunity for firms to compete by differentiating their product.
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In a small town the local hardware store can charge higher prices than one in a large city with many hardware stores because the local hardware store
A. is privately owned. B. has fewer items to sell so they need to sell items for higher prices. C. has more market power in the small town. D. is motivated by profit while the other hardware stores are not.
If a market is allocatively efficient,
a. firms are minimizing marginal cost b. firms are minimizing total cost c. consumers are minimizing expenditures d. it must be impossible to increase total utility e. it must be impossible to decrease output
When a voter chooses to remain ignorant when the opportunity costs of gathering information outweigh the benefits, it is called:
A. trigger mechanisms. B. instinct theorem. C. irrational voting. D. rational ignorance.
The assumption of rationality implies that market participants:
a. always choose the option with the highest gross benefit. b. assess expected benefits and expected costs. c. do not make decisions under uncertainty. d. do not care about benefits or costs accruing in the future.