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:

Antipyretic

A type of medication used to reduce or prevent fever by lowering the body temperature.

Meniere's Disease

A disorder of the inner ear that can lead to dizzy spells (vertigo) and hearing loss.

Inner Ear

The core section of the ear, which includes the cochlea, vestibule, and semicircular canals, plays a crucial role in both hearing and maintaining balance.

Stapedectomy

A surgical procedure to remove part or all of the stapes bone in the middle ear, usually to treat hearing loss caused by otosclerosis.