Monopolistic competition is considered inefficient because
a. price exceeds marginal cost.
b. output is excessive.
c. long-run profits are positive.
d. barriers to entry limit the number of firms in the market.
a
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After graduation, you start an internet-based firm that allows people to buy and sell books online. Based on your market research, you believe there are two basic types of customers
The first type is the casual reader who has relatively low willingness-to-pay for your services, and their annual demand is Q1 = 30 - 40P where Q1 is the number of books traded per year and P is the price you charge per book traded. The second type of customer is the avid reader who has relatively high willingness-to-pay for your services, and their demand is Q2 = 100 - 50P. The marginal cost of your online service is $0.40 per book traded. a. If you set your usage fee equal to the marginal cost, how many books will each type of customer trade on your system? What is the consumer surplus enjoyed by each type of customer? b. What is the optimal entry fee that you should charge under a two-part tariff pricing scheme for access to your online market? How much consumer surplus is left for the two types of customers after they pay the entry fee and usage fee?
Which of the following holds true, if goods sell for the same price worldwide when converted to a common currency?
a. A high rate of inflation exists. b. A fixed exchange-rate system exists. c. Purchasing power parity exists. d. The foreign exchange market is in equilibrium. e. Arbitrage opportunities exist.