Question

In: Economics

6. Firms entering monopolistic competitive markets face strong barriers to entry True False 7. If a...

6. Firms entering monopolistic competitive markets face strong barriers to entry

True

False

7. If a monopolistically competitive firm can earn a profit, it will adjust production quantity until MR = MC.

True

False

8. A monopolistic competitive firm identifies that it is producing at an output level at which it's marginal revenue is greater than it's marginal cost. This firm should decrease quantity produced and increase price to increase profit or reduce losses.

True

False

9. In the short-run, firms in a monopolistically competitive market may earn economic profit.

True

False

10. In the long-run in monopolistic competition, all economies of scale are exhausted.

True

False

Solutions

Expert Solution

6. Firms entering monopolistic competitive markets face strong barriers to entry

False
the market has free entry and exit which make zero economic profit in long run.

7. If a monopolistically competitive firm can earn a profit, it will adjust production quantity until MR = MC.

False
it cannot produce the economic profit in long run and there is a possibility of losses in short run also by producing at MR=mC

8. A monopolistic competitive firm identifies that it is producing at an output level at which it's marginal revenue is greater than it's marginal cost. This firm should decrease quantity produced and increase the price to increase profit or reduce losses.

False
the MR>MC, so the firm should increase the output up to MR=MC which is profit maximizing or loss minimizing the level of output to increase profit or minimize losses

9. In the short-run, firms in a monopolistically competitive market may earn the economic profit.

True
the firm can earn economic profit in short run or economic losses or zero economic profit

10. In the long-run in monopolistic competition, all economies of scale are exhausted.

False
the firm has excess capacity in the long run as well but it produces at MR=MC, not at P=min(ATC)

?


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