Why is there a price markup over marginal cost in monopolistic competition?
What will be an ideal response?
A firm's markup is the amount by which price exceeds marginal cost. There is a markup in monopolistic competition because P > MR at all levels of output. Since the firm produces the quantity at which MR = MC, the fact that P > MR means that P > MC, so that there is a markup.
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If an economy is represented by a point inside its production possibilities curve
A) it cannot produce more of one product unless it stops producing the other product entirely. B) it cannot possibly produce more of one product, even if it produces less of another product. C) it can produce more of one product only if it produces less of another product. D) it can produce more of one product even if it does not produce less of another product.
"Banks hold about 50 percent of their assets as reserves." Is the previous statement correct or not?
What will be an ideal response?