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One difference between perfect competition and monopolistic competition is that
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firms in monopolistic competition face a downward-sloping demand curve
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In monopolistically competitive industries,
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non-price competition through product differentiation is vigorous.
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A characteristic of monopolistic competition is
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product differentiation
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Firms in monopolistic competition can achieve product differentiation by
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advertising special characteristics
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In monopolistic competition, each firm's marginal revenue curve lies ________ its demand curve because of ________.
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below; product differentiation
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If a monopolistically competitive firm's marginal cost curve shifts upward, then its level of output
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will decrease
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In a cartel, the incentive to cheat is significant because
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each firm has an incentive to expand its output
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If a duopoly has a collusive agreement that maximizes joint profit, then each duopolist has
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an incentive to cheat by lowering its price
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A firm might be tempted to cheat on a collusive price-fixing agreement by setting a
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lower price and higher quantity than agreed
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A trigger strategy is one in which a player
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cooperates in the current period if the other player has always cooperated, but cheats forever if the other player ever cheats.
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In a repeated game,
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a tit-for-tat strategy is mild and a trigger strategy is severe
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Price wars can be the result of
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new firms entering an industry and all firms then finding themselves in a prisoners' dilemma.
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In an oligopoly with a collusive agreement, the total industry profits will be smallest when
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all firms cheat on the agreement
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The substitution effect describes how
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a price increase creates incentives for buyers to seek alternatives
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If the income effect is the only economic principle operating when price increases then
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the quantity demanded of an inferior good will increase
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Total utility
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depends on individual attitudes and preferences
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Economic analysis of utility
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assumes that tastes are given and that they are also stable
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Marginal utility is the
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additional satisfaction obtained from consuming one more unit of a good
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Total utility can be measured as
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the sum of all marginal utilities
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If a good is offered to a rational individual for free, she will
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stop consuming it when its marginal utility equals zero
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