TRUE OR FALSE?
(A) A high ratio of distribution cost to total cost tends to increase competition by widening the geographic area over which any individual producer can compete.
(B) The price elasticity of demand will tend to fall as new competitors introduce substitute products.
(C) Equilibrium in monopolistically competitive markets requires that firms be operating at the minimum point on the long-run average cost curve.
(D) An increase in product differentiation will tend to decrease the slope of firm demand curves.
(E) A perfectly functioning cartel would achieve the perfectly competitive industry price-output combination.
Here is the answer:
A) False. A low ratio of distribution cost to total cost tends to increase competition. The reason is low ratio it tends to
widen the geographic area for any individual producer to compete in the ...
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