Explain the characteristics of monopolistic competition. Explain how price and output are determined in monopolistic competition. Illustrate your answer with a graph
What will be an ideal response?
The characteristics of monopolistic competition are: a large number of firms, no barriers to entry, and product differentiation. The monopolistic competitor determines how much output to produce by equating marginal cost and marginal revenue. Price is determined by the demand curve.
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If the LRAC curve for Company A has a clear minimum point without a curved bottom, then Company B will have ________________ if it produces a different number of units.
a. lower costs b. higher costs c. lower profits d. higher profits
Figure 15.3 depicts a one-mile stretch of beach with 100 swimmers distributed evenly along the beach. There are two ice cream vendors - 1 and 2 - on the beach selling an identical product. Assume that each swimmer buys only one ice cream cone and that they prefer to buy ice cream from the nearer vendor. If vendor 1 is at B while vendor 2 is at D, vendor 1 will sell ________ ice cream cones while vendor 2 sells ________ ice cream cones.
A. 40; 60 B. 45; 55 C. 55; 45 D. 60; 40
Depositors lack of information about the quality of bank assets can lead to
A) bank panics. B) bank booms. C) sequencing. D) asset transformation.
The substitution effect suggests that
A. when prices are higher, you buy less of what you originally wanted and use something else instead. B. when prices are higher, you buy fewer because the marginal utility of a good is diminishing. C. when prices are higher, you buy more. D. when prices are higher, your buying power is less, so you buy less.