A perfectly horizontal demand curve has
A) zero elasticity.
B) some positive finite elasticity.
C) negative elasticity.
D) elasticity equals infinity.
Answer: D
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"It is clear from the theory of monopolistic competition that product development is not pushed to its efficient level." This statement is
A) false because there is so much product differentiation in monopolistic competition. B) true because there is little incentive to innovate in monopolistic competition. C) false because there are so many wasteful innovations in monopolistic competition that are merely cosmetic. D) true because price exceeds marginal revenue in monopolistic competition.
If the firm in the figure above is unregulated, the consumer surplus will be
A) zero. B) $100. C) $400. D) $200.
The circular flow model indicates that income flows from households to firms through product markets and back from firms to households through factor markets. Is the total amount spent by all households equal to the total income that flows back to all
households? Why or why not? Is the amount spent by each individual household equal to the amount that flows back to that specific household? Why or why not?
In the long run, a monopolistically competitive firm will produce too little output to minimize average cost. Therefore, it will have
a. positive economic profit b. negative economic profit c. excess profit d. X-inefficiency e. excess capacity