1. Monopolistic competition describes a market served by firms that sell products. 2. Arrows up or down: At a firm’s current level of output, marginal revenue exceeds the marginal cost. The firm...

1. Monopolistic competition describes a market served by


firms that sell
products.

2. Arrows up or down: At a firm’s current level of output, marginal revenue exceeds the marginal cost. The firm should

its output and
its price.

3. The marginal principle refers to

(increasing/decreasing) the level of an activity as long as its marginal benefit exceeds its marginal cost.

4. Arrows up or down: The entry of a second firm into a market with a monopoly will

(increase/ decrease) the first firm’s average cost of production.

5. Arrows up or down: Changes in regulatory policy in the 1980s

the price of trucking services and

the profits of trucking firms.

6. Arrows up or down: The entry of a satellite TV firm


consumer surplus, in part because the cable company

the quality of service while either


price or


price by a relatively small amount. (Related to Application 1 on page 587.)