Monopolistic competition is characterized by excess capacity because:
A. firms charge a price that is less than marginal cost.
B. firms produce at an output level less than the least-cost output.
C. the demand for a product is perfectly elastic in this type of industry.
D. firms are always profitable in the long run.
Answer: B
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The assumption that wages adjust more slowly than prices implies that the Phillips Curve
A) exists in the short-run. B) exists in the long-run. C) is vertical. D) does not exist.
A firm must spend $10 million today on a project that is expected to bring in annual revenues of $1.5 million for the next 10 years (beginning at the end of year 1)
a. If the firm's cost of capital is 5%, what is the NPV of this project? b. If the firm's cost of capital is 10%, what is the NPV of this project? c. What is the internal rate of return?