Say you and two friends are 13,500 feet into a hiking trip to the summit of a 14,000 peak in Colorado. At that point, a rainstorm comes up all of a sudden and makes the last 500 feet trek quite treacherous. One of your friends wants to stop and head down and argues it would be dangerous to continue. He says he doesn't care about the 4 hours he has hiked already to get where he is, he only cares about the final 500 feet. Your other friend, however, wants to continue and argues that it would be stupid to quit so close to the summit, especially after all the hard work you have incurred. Which one of your two friends has a more rational argument? Please explain using the concepts from the textbook.
What will be an ideal response?
The 13,500 feet are a sunk cost so only the impact of the last 500 is relevant. Because the cost of the last 500 is very difficult the friend who wants to turn back is more rational.
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The most significant difference between perfect competition and monopolistic competition is that
A) in a perfectly competitive market products are differentiated, while in a monopolistically competitive market products are homogeneous. B) in a perfectly competitive market products are homogeneous, while in a monopolistically competitive market products are differentiated. C) in a perfectly competitive market there is a large number of sellers, while in a monopolistically competitive market there is a small number of sellers. D) in a perfectly competitive market there is a small number of sellers, while in a monopolistically competitive market there is a large number of sellers.
A market structure characterized by a very few firms who behave interdependently is known as:
a. monopoly. b. monopolistic competition. c. natural monopoly. d. oligopoly.