The Assumption of Flexible Prices Is a More Plausible Assumption

question 58

Multiple Choice

The assumption of flexible prices is a more plausible assumption when applied to price changes that occur:

• A) from minute to minute.
• B) from year to year.
• C) in the long run.
• D) in the short run.

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Definitions:

Monopolistically Competitive

Describing a market structure where many companies sell products that are similar but not identical, leading to competitive prices and product differentiation.

Demand Schedule

A chart that displays the quantity of a good or service demanded at various prices.

Price Elastic

The measure of how much the quantity demanded of a good responds to a change in the price of that good, reflecting its elasticity.

Cournot Duopolist

A type of duopoly model in which two firms choose their output levels simultaneously to maximize profit, assuming the competitor's output level is fixed.