Does the fact that monopolistically competitive firms do not achieve productive efficiency or allocative efficiency mean that there is a significant loss in consumer welfare?
What will be an ideal response?
No. Although monopolistically competitive firms reduce total economic surplus by producing less than the efficient amount (creating a deadweight loss) they also increase consumer welfare because people are willing to pay more for variety and for products that are more closely suited to their tastes. Consumer welfare can be measured by consumer surplus.
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The old adage "rules are made to be broken" would typically be associated with economists who might advocate ________
A) stabilization policy B) monetary policy C) rule-determined policy D) discretionary policy E) fiscal policy
The standard deviation of a two-asset portfolio (with a risky and a non-risky asset) is equal to
A) the fraction invested in the risky asset times the standard deviation of the non-risky asset. B) the fraction invested in the non-risky asset times the standard deviation of the risky asset. C) the fraction invested in the risky asset times the standard deviation of that asset. D) the fraction invested in the non-risky asset times the standard deviation of that asset.
If input prices for a perfectly competitive firm increase as the output of the industry expand in the long run, the long-run industry supply curve will:
a. have a positive slope. b. have a negative slope. c. be perfectly horizontal. d. be perfectly vertical.
The CEO and stockholders talk almost everyday
Indicate whether the statement is true or false