As product differentiation decreases, ________ increases.
a | markup |
b | demand inelasticity |
c | marginal cost |
d | demand elasticity |
e |
excess capacity |
A monopolistically competitive firm is inefficient because the firm
a | is not maximizing its profit. |
b | earns positive economic profit in the long run. |
c | produces an output where average total cost is not minimum. |
d | produces where price is equal to minimum average total cost. |
e | is producing at an output amount that corresponds to marginal cost equal to price. |
Which of the following statements best describes firms under monopolistic competition?
a | Firms do not compete using advertising. |
b | There is little competition between firms. |
c | There are a few firms that collude to set the highest price. |
d | The firms compete using quality, location, and style. |
e | There is little price or quality competition. |
1. Demand inelasticity
Reason: A decrease in product differentiation will leave consumers with less options to chose from. This will reduce their elasticity of demand for goods.
2. Produces an output where ATC is not minimum
Reason: A monopolistic competitive firm maximizes profits and produces where MR=MC and not at the efficient point where ATC is not minimum
3. The firms compete using quality, location and style
Reason: Firms under Monopolistic competition differ in product quality and other features. This makes them compete with each other using advertising on the basis of quality, location, style etc.
As product differentiation decreases, ________ increases. a markup b demand inelasticity c marginal cost d demand...
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1.As product differentiation decreases, ________ increases. markup demand inelasticity marginal cost excess capacity
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