A firm in a monopolistically competitive market faces a
a. downward-sloping demand curve because the firm's product is different from those offered by other firms.
b. downward-sloping demand curve because there are only a few firms in the market.
c. horizontal demand curve because there are many firms in the market.
d. horizontal demand curve because firms can enter the market without restriction.
a
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Suppose that two clothing manufacturers, Frederick's Fashions and Stephan's Styles, announce that they plan to merge. The Herfindahl-Hirschman index is currently 1,500. After the merger, the HHI will rise to 1,560. This market is
A) highly concentrated and so the government will definitely challenge the merger. B) moderately concentrated and because the merger increases the HHI by more than 50 points, the government will definitely challenge the merger. C) moderately concentrated, but because the merger increases the HHI by less than 100 points, the government will probably not challenge the merger. D) competitive and so the government will not challenge the merger.
The share of the burden of an emissions tax on output borne by the consumer of the polluting output will rise as
a. the tax rises. b. demand elasticity falls. c. demand elasticity rises. d. the tax falls.