Which of the following is true of monopolistic competition but is not true of perfect competition?
a. Each firm distinguishes its product from that of its competitors.
b. The firm engages in marginal cost pricing.
c. The firm produces at the point where average total cost is minimized.
d. There are significant barriers to the entry of new firms in the industry.
Ans: a. Each firm distinguishes its product from that of its competitors.
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If the government finances an increase in government purchases with an increase in taxes, which of the following would you not expect to see?
A) an increase in the exchange rate B) a decrease in net exports C) a decrease in the interest rate D) an increase in aggregate demand
In the long run,
a. an increase in the federal budget deficit can lower the interest rate and investment spending. b. an increase in the federal budget deficit can raise the interest rate and investment spending. c. a decrease in the federal budget deficit can lower the interest rate and raise investment spending. d. a decrease in the federal budget deficit can raise the interest rate and lower investment spending. e. a decrease in the federal budget deficit can lower the interest rate and lower investment spending.