10 Questions
Which of the following is a characteristic of the long-run equilibrium in a monopolistically competitive market?
Price equals average total cost
What is one difference between monopolistic competition and perfect competition?
Excess capacity
Why does price exceed marginal cost in a monopolistically competitive market?
Due to profit maximization
What is one critique of advertising?
It manipulates people's tastes
How do defenders of advertising argue it benefits customers?
By providing information
What is branding?
The process of creating a business identity
What is one effect of excess capacity in monopolistic competition?
Higher prices for consumers
Why does price equal average total cost in the long-run equilibrium of a monopolistically competitive market?
Due to free entry and exit
What is one argument against the ability of policymakers to correct inefficiencies in monopolistic competition?
Limited ability
What is one noteworthy difference between monopolistic competition and perfect competition?
Excess capacity
Test your knowledge on the factors that determine price elasticity of demand. This quiz covers topics such as availability of close substitutes, necessities versus luxuries, definition of the market, proportion of income devoted to the product, and time horizon. Get ready to learn and assess your understanding of price elasticity!
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