The product diversity resulting from monopolistic competition comes at the expense of having:
a. firms that will earn positive profits.
b. firms that are too small to maximize profit.
c. higher profit than would prevail under perfect competition.
d. efficiency in the long run
Ans: d. efficiency in the long run
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What will be an ideal response?
One of the ugly stepsisters argues that she, rather than Cinderella, should go to the ball because she will derive more utility from it than Cinderella. An economist would: a. agree, since the ugly stepsister's reasoning is sound
b. want to know how much utility each will receive from attending the ball in order to determine which woman should attend. c. point out that making interpersonal utility comparisons is not possible. d. ask how many balls each woman has attended in order to calculate the marginal utility that each would derive from attending, and then decide who should go to the ball.