Explain why advertising is very important to a monopolistically competitive firm but not to a perfectly competitive firm or a monopolistic firm
A monopolistically competitive firm advertises in order to increase demand for its goods and make demand more inelastic. In contrast, a perfectly competitive firm sells a homogeneous good and can sell all it wants at the market price. As such, it has no reason to advertise at all. While a monopolistic firm could potentially increase demand for its good, advertising is generally not as important as a form of non-price competition because there are no other firms with which to compete in the industry.
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Investment in both physical and human capital tends to enhance economic growth because it generally
a. increases consumption during the current period. b. makes it possible for individuals to produce more goods and services per hour worked. c. encourages firms to expand output by employing more low productivity workers. d. encourages workers to unionize and thereby fight for higher wages.
If a firm faces a downward-sloping demand curve
A) the demand for its product must be inelastic.
B) it has no control over the price or the quantity sold.
C) it must reduce its price to sell more units.
D) it will always make a profit.