Which of the Following Is NOT True of Monopolistic Competition

question 144

Multiple Choice

Which of the following is NOT true of monopolistic competition?

• A) There is free entry and exit.
• B) There are a large number of firms.
• C) Firms can compete on price and quality.
• D) Firms produce a good that is a perfect substitute for their competitors' goods.

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Definitions:

Risk Premium

A risk premium is the additional return expected by an investor for taking on a higher level of risk, compared to a risk-free investment.

Expected Return

The average return anticipated on an investment based on its historical or probable future earnings.

Market Risk Premium

The additional return expected by investors for holding a risky market portfolio instead of risk-free assets.

Beta Risk

Beta risk measures the volatility of an investment in relation to the market as a whole, indicating how much an asset's price is expected to fluctuate relative to overall market movements.