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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A kink in the demand curve facing an oligopolist is caused by:
a. rapidly rising marginal revenues. b. excessive advertising. c. the belief that competitors will follow price increases but not match price decreases. d. the tendency of competitors to follow price reductions but not price increases.
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What will be an ideal response?
In the above figure, moving from producing 50 guitars and 50 ukuleles to producing 25 guitars and 75 ukuleles, the opportunity cost of one ukulele is
A. 1 guitar. B. 25 ukuleles. C. 75 ukuleles. D. 25 guitars.
Mary can clean 20 windows per hour or type 30 pages of paper per hour. Tom can clean 18 windows per hour or he can type 25 pages of paper per hour. Based on this
A) Mary has comparative advantages in activities. B) Tom has comparative advantages in both activities. C) Tom has a comparative advantage in cleaning windows. D) Mary has a comparative advantage in cleaning windows.