Price Elasticity of Demand
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Questions and Answers

Which of the following is a characteristic of the long-run equilibrium in a monopolistically competitive market?

  • Price is determined by the government
  • Price equals average total cost (correct)
  • Price equals marginal cost
  • Price exceeds average total cost
  • What is one difference between monopolistic competition and perfect competition?

  • Price is determined by the government
  • Excess capacity (correct)
  • Price equals marginal cost
  • Price equals average total cost
  • Why does price exceed marginal cost in a monopolistically competitive market?

  • Due to government regulations
  • Due to firms manipulating prices
  • Due to profit maximization (correct)
  • Due to free entry and exit
  • What is one critique of advertising?

    <p>It manipulates people's tastes</p> Signup and view all the answers

    How do defenders of advertising argue it benefits customers?

    <p>By providing information</p> Signup and view all the answers

    What is branding?

    <p>The process of creating a business identity</p> Signup and view all the answers

    What is one effect of excess capacity in monopolistic competition?

    <p>Higher prices for consumers</p> Signup and view all the answers

    Why does price equal average total cost in the long-run equilibrium of a monopolistically competitive market?

    <p>Due to free entry and exit</p> Signup and view all the answers

    What is one argument against the ability of policymakers to correct inefficiencies in monopolistic competition?

    <p>Limited ability</p> Signup and view all the answers

    What is one noteworthy difference between monopolistic competition and perfect competition?

    <p>Excess capacity</p> Signup and view all the answers

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