In a monopolistically competitive market,
A. a firm has market power because it produces a differentiated product.
B. a firm earns economic profits in the long run because it has market power.
C. there are a large number of firms.
D. both a and b
E. both a and c
Answer: E
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Economic theory and experience since 1973 indicate that, under floating exchange rates, a country's fiscal and monetary policies in the short-run and the long-run can
A) have both domestic and foreign economic impact. B) have domestic or foreign economic impact, but not both. C) have domestic but not foreign economic impact. D) have foreign but not domestic economic impact. E) have neither domestic nor foreign economic impact.
Prices that adjust slowly to their long-run equilibrium ________
A) help the economy to avoid economic fluctuations B) call for policies that focus on short-run fluctuations C) are conducive to maintaining low inflation D) all of the above E) none of the above