A perfectly competitive firm faces a horizontal demand curve, which implies that
a. price never changes, even though market demand and supply might change over time
b. the firm cannot affect price by any action it takes
c. the firm makes zero profits.
d. the output rate of the firm is indeterminate.
Answer: b. the firm cannot affect price by any action it takes
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Which of the following describes the vicious circle of poverty?
a. Because resources are limited, all economies eventually become poor. b. In the long run, economies cycle between being rich and being poor.c. For an economy to grow requires more consumption goods, which requires less capital goods, which means it will eventually become poor d. Due to excessive consumption, rich economies will destroy their resource base and eventually become poor. e. Poor economies are poor because they do not produce sufficient capital goods, and without the production of sufficient capital goods, they remain poor.
What are the advantages and disadvantages of resource allocation under monopolistic competition compared to perfect competition?