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Author Question: When can a seller's investment in reducing transaction cost increase the price of the product to ... (Read 58 times)

ETearle

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on: Jun 30, 2018
When can a seller's investment in reducing transaction cost increase the price of the product to customers but still leave them better off?

Question 2

Which of the following is uncharacteristic of monopolistic competition in the long run?
 a. a large number of sellers in the industry
  b. zero economic profits
 c. price in excess of marginal cost
 d. firms have no excess capacity


Galvarado142

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Reply #1 on: Jun 30, 2018
Answer to Question 1

When the seller tries to reduce transaction cost through informative advertising, the customer's cost of acquiring information reduces, thereby making them better off.

Answer to Question 2

d


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