In the New Keynesian View,a Monopolistically Competitive Firm May Fail

question 10

Multiple Choice

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.

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Definitions:

Income

Funds accrued regularly from work performed or assets invested.

Good Y

Typically used in economics as an arbitrary designation for a commodity or product in theoretical models and analysis.

Pretzels

A type of baked bread product, often shaped into a twisted knot, that is commonly salted and can vary in flavor.

Lemonade

A beverage made from lemon juice, water, and sweeteners, often homemade and sold during warm weather for refreshment.