Why is there a price markup over marginal cost in monopolistic competition?
What will be an ideal response?
A firm's markup is the amount by which price exceeds marginal cost. There is a markup in monopolistic competition because P > MR at all levels of output. Since the firm produces the quantity at which MR = MC, the fact that P > MR means that P > MC, so that there is a markup.
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In an economy in with no income taxes or imports, the multiplier equals
A) . B) . C) . D) . E) .
When there is an inflationary gap there is
A. too much spending and taxes should be raised. B. too much spending and taxes should be lowered. C. too little spending and taxes should be raised. D. too little spending and taxes should be lowered.
Which of the following is a public good?
A. public defense B. public television C. a library D. schools E. all of these answer options are correct.
Holding other factors constant, a higher relative price of a firm's output will:
A. increase national saving. B. increase investment. C. decrease investment. D. decrease national saving.