What is the most important characteristic of monopolistic competition? How do firms behave differently from perfect competitors?
What will be an ideal response?
Product differentiation is the most important characteristic of perfect competition. Product differentiation generates the downward sloping demand curve that a firm faces. With heterogeneous products, monopolistic competitors will advertise and use sales promotion techniques that perfect competitors would not use.
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Recent research by Keynesians and classicals has led to
A) a reconciliation of the types of models they use. B) the recognition by classical economists that prices adjust very slowly. C) convincing evidence that TFP shocks are the dominant force affecting the business cycle. D) the refutation of the efficiency wage model.
An effect of international trade is
A) the increase in the average price of goods as the cost of transportation has to be included. B) the transmission of ideas around the world. C) that only countries that have absolute advantage in producing a good can participate. D) that the United States has a trade surplus.