One way to view the cost structure of monopolistic competition is to say that the cost of product differentiation is equal to
A) the difference between marginal revenue and marginal cost.
B) the difference between the cost of production for a monopolistically competitive firm in an open market and the minimum average total cost.
C) the sum of price and marginal cost.
D) the sum of marginal cost and minimum average cost.
B
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The production possibilities curve illustrates the basic principle that
a. an economy's capacity to produce increases in proportion to its population. b. if all resources of an economy are in use, more of one good can be produced only if less of another is produced. c. an economy will automatically seek that output at which all of its resources are employed. d. no opportunity cost exists in production.
Which of the following statements is FALSE?
A) The rationing function of prices is not allowed to freely operate when the government imposes price controls. B) Price controls may take the form of price ceilings or price floors. C) Price ceilings below the equilibrium price can cause black markets to develop. D) Rent controls are examples of price floors.