Why Is Each Firm in a Monopolistically Competitive Industry Considered

question 9

Multiple Choice

Why is each firm in a monopolistically competitive industry considered as a "mini" monopoly?

• A)There is a large number of sellers in the market
• B)Each firm in monopolistic competition is a price taker
• C)The product of each firm is unique in some way or the other
• D)Each firm faces a perfectly elastic demand curve
• E)There exists a large number of close substitutes of the products

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Definitions:

Bond Rating

An evaluation provided by a credit rating agency regarding the creditworthiness of a bond issuer, affecting the interest rates and investment appeal of its bonds.

Secured Debt

A debt that is backed by collateral, providing the lender with assurance that the loan can be recovered if defaulted.

Unsecured Debt

A type of debt that is not backed by collateral, making it riskier for lenders and often resulting in higher interest rates for borrowers.

Reinvestment Rate Risk

The risk that the yield from reinvesting cash flows will be lower than the initial investment's yield, typical in fixed-income securities.