How are the products sold by a monopolistically competitive firm different from the products sold in a competitive market?
What will be an ideal response?
In a competitive market, the products sold by each producer are identical to the products sold by other firms. In other words, the products sold in a competitive market are homogeneous and are perfect substitutes for each other. However, in a monopolistically competitive market, the products are differentiated. The products are close substitutes but are not identical.
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Matt estimates the marginal benefit of eating one slice of pizza at $3. The marginal benefit of the 2nd slice is $2, the marginal benefit of the third slice is $1, and the marginal benefit of the 4th slice is $0. If the price is $1.50 per slice, to maximize his net benefit Matt should eat:
a. "1 slice." b. 2 slices. c. 3 slices. d. 4 slices.
A company that retains a high bond rating during a recession in which many other companies see their bond ratings cut will experience
A) an increased flow of funds into the market for its securities. B) an increased demand for its securities, resulting in a higher expected return. C) a decreased demand for its securities, resulting in a lower expected return. D) a decreased flow of funds into the market for its securities.