In a monopolistically competitive market, the seller maximizes profits by
A. setting P = ATC.
B. setting price where P = MC.
C. setting MC = ATC.
D. setting price where MR = MC.
Answer: D
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In regards to the uncommon length of the Great Depression, both Schumpeter and Higgs contend that:
a. private investment remained depressed in part due to the political climate created by the New Deal. b. Social Security and the freedoms granted to labor, along with a progressive tax structure promoted growth in private investment. c. the undistributed profits tax of 1936 encouraged businesses to undertake long-term investments. d. the New Deal rhetoric from President Roosevelt, offered a pro-business slant that offended labor groups.
A given change in disposable income would have the greatest effect on aggregate demand with which of the following marginal propensities to consume?
a. 0.4 b. 0.6 c. 0.8 d. 0.2