Which of the following is characteristic of oligopoly, but NOT of monopolistic competition?
A) The choices made by one firm have a significant effect on other firms.
B) Each firm faces a downward-sloping demand curve.
C) Firms are profit-maximizers.
D) There is more than one firm in the industry.
A
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Suppose that consumers become more pessimistic about the future and, as a result, reduce their consumption by $10 billion. If the marginal propensity to consume is 0.80, how will this $10 billion reduction in consumption affect the equilibrium level of real GDP?
A. Real GDP will decrease by $8 billion. B. Real GDP will decrease by $10 billion. C. Real GDP will decrease by $40 billion. D. Real GDP will decrease by $50 billion.
The role that prices play in distributing scarce goods and services to those consumers who value them the most highly is known as the ________ function of price.
A. multiplicative B. rationing C. equilibrium D. allocative