Question

A monopolistically competitive firm has excess capacity in the long run. This means that it:

Group of answer choices

produces less than the output at which average total costs are minimized.

could produce more by moving to a larger plant.

produces less than the output at which price and marginal cost are equal.

doesn't maximize profits.

Question 22 pts

If two firms are identical in all respects except that one has more capital than another, the total product curve for the firm with more capital:

Group of answer choices

must equal the total product curve for the firm with less capital

will show no diminishing marginal returns

will lie above the total product curve for the firm with less capital

will lie below the total product curve for the firm with less capital

Question 32

Suppose that the market for haircuts in a community is perfectly competitive and that the market is initially in long-run equilibrium. Subsequently, a decrease in population decreases the demand for haircuts. In the short run, we expect that the market price will ________ and the output of a typical firm will ________.

Group of answer choices

rise; fall

rise; rise

fall; fall

fall; rise

Answer 1

Question 1

A monopolistically competitive firm has excess capacity in the long run. This means that it produces less than the output at which average total costs are minimized

Monopolistically competitive firms operate with excess capacity because the zero-profit tangency equilibrium occurs along the downward-sloping part of a firm's short-run average cost curve, so the firm's plant has the capacity to produce more output at lower average cost than it is actually producing

Question 2

If two firms are identical in all respects except that one has more capital than another, the total product curve for the firm with more capital will lie above the total product curve for the firm with less capital.

More of the fixed capital results in higher total product curve.

Question 3

Decrease in demand shifts demand curve to the left which can result in fall in market price and fall in output in the short run

Hence answer is Fall, Fall