The excess capacity theorem implies that
A. consumers would be better off if some monopolistically competitive firms left their markets.
B. consumers would be better off with more standardization of products.
C. monopolistic competition benefits society by eliminating excess capacity in production.
D. monopolistic competition wastes some of society’s resources but the elimination of this waste does not necessarily benefit consumers.
Answer: D
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The net benefit of a particular alternative equals:
A) the benefits received from the alternative plus the costs incurred in choosing the alternative. B) the benefits received from the alternative divided by the costs incurred in choosing the alternative. C) the costs incurred in choosing the alternative divided by the benefits received from the alternative. D) the benefits received from the alternative minus the costs incurred in choosing the alternative.
The above table shows production points on Sweet-Tooth Land's production possibilities frontier. Which of the following statements is TRUE?
A) Producing 0 chocolate bars and 100 cans of cola is both attainable and efficient. B) Producing 20 chocolate bars and 80 cans of cola is attainable, but inefficient. C) Producing 30 chocolate bars and 38 cans of cola is only attainable with an increase in technology. D) Producing 40 chocolate bars and 0 cans of cola is unattainable and inefficient.
Firms will continue to enter a perfectly competitive industry until
a. the supply curve is vertical. b. the supply curve is meaningless. c. any excess returns have been competed away. d. all resources are fully employed.
When the economy is below full employment, it is producing
A. Inside the production possibilities curve. B. On the production possibilities curve. C. Beyond the production possibilities curve. D. None of the choices are correct.