1. Which of the following types of economic regulation is most likely to encourage firms to engage in cost cutting?
A) entry and output restrictions
B) rate of return regulation
C) price cap regulation
D) None of the above encourages cost cutting.
2. In monopolistic competition, firms compete on the basis of
A) price only.
B) price, quality, and marketing.
C) marketing only.
D) quality and marketing, but not price.
3. Which of the following statements is FALSE concerning monopolistic competition?
A) There are many firms.
B) Firms sell a differentiated product.
C) Each firm's actions influence rival firms.
D) Firms are free to enter and exit.