How is a monopolistically competitive firm likely to respond to fluctuations in demand in the short run?
A) by selling more or less at the posted price
B) by changing prices
C) by reducing menu costs
D) by increasing menu costs
Which of the following is NOT an example of a monopolistically competitive market?
A) high fashion clothing
B) medical care
A) extracting certain forms of energy from rock formations.
B) deep water drilling for energy with minimal externalities.
C) the reduction of menu costs, thus allowing prices to adjust more freely.
D) breaking down the production of goods, resulting in more competitive markets.
In the new Keynesian view,a monopolistically competitive firm may fail to increase the price of its product as demand increases because
A) if it does, it will lose all of its customers.
B) the cost to it of changing prices may exceed the benefit of doing so.
C) prices of monopolistically competitive firms are regulated by the federal government and may only be changed with permission.
D) for a monopolistically competitive firm, price is below marginal cost.