What are the benefits and costs associated with monopolistic competition?
What will be an ideal response?
The benefits are lower prices than monopoly and more product variety for consumers. The cost is that monopolistically competitive firms do not operate at the minimum of their average cost curves, so their average costs are higher.
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Consider a small open economy in equilibrium with a current account deficit
(a) Draw a diagram showing this situation. (b) What happens to national saving, investment, and the current account balance in equilibrium if government expenditures rise temporarily? Show this result in your diagram.
Increasing returns to scale in production means
A) more than 10% as much of all inputs are required to increase output 10%. B) less than twice as much of all inputs are required to double output. C) more than twice as much of only one input is required to double output. D) isoquants must be linear.
The signaling theory of education maintains that workers who complete specific levels of education enhance their productivity through education
a. True b. False Indicate whether the statement is true or false
The quantity theory of money assumes that the velocity of money:
A. is constant. B. will rise if the money supply rises and fall if the money supply falls. C. will rise if the money supply rises, but it will not change if the money supply falls. D. will fall if the money supply rises, and it will rise if the money supply falls.