What is the source of market power for a monopolistically competitive firm?
Product differentiation, a key characteristic of a monopolistically competitive firm, provides it some market power or some ability to determine its own price. Therefore, the demand curve for a monopolistic competitor is based on the extent of its product differentiation and how many competitors it faces.
You might also like to view...
Discuss three channels by which monetary policy affects stock prices and aggregate spending
What will be an ideal response?
A decrease in the money supply:
a. lowers the interest rate, causing a decrease in investment and a decrease in GDP. b. lowers the interest rate, causing a decrease in investment and an increase in GDP. c. raises the interest rate, causing an increase in investment and a decrease in GDP. d. raises the interest rate, causing an increase in investment and an increase in GDP. e. raises the interest rate, causing a decrease in investment and a decrease in GDP.