Which of the following is a characteristic of a monopolistically competitive market?I.Firms sell differentiated products.II.Each firm's product is a close substitute for other firms' products.III.Firms freely enter and exit the market.
A. I only
B. I and III only
C. II and III only
D. I, II, and III
Answer: D
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Refer to the scenario above. How will the demand for pens faced by the existing pen manufacturers in Eduland be affected if several firms exit the industry in the long run?
A) The demand curve by existing firms will become perfectly inelastic. B) The demand curve by existing firms will become perfectly elastic. C) The demand faced by existing firms will increase. D) The demand faced by existing firms will decrease.
All of the following government actions create barriers to entry EXCEPT
A) limiting the number of airlines that may operate at an airport. B) granting a patent to a drug company. C) requiring a pizza parlor to get a business license. D) giving a power company exclusive use of the city's transmission lines.
The demand curve facing a firm
a. indicates the quantity of output that customers will purchase from that firm, at various prices b. shows the minimum cost of producing any level of output c. is drawn assuming that the firm is operating in the short run d. indicates how much output a profit-maximizing firm will produce, at various prices e. is downward sloping because consumers have less money to spend, the more output they purchase
If aggregate supply keeps decreasing while aggregate demand does not change, there will come at time when
a. demand-dull inflation will occur b. cost-push inflation will occur c. demand-push inflation will occur d. cost-pull inflation will occur e. the economy will reach full employment