Question

1

For a kinked demand curve, the marginal revenue curve is:

1. positively sloped.

2. a horizontal line.

3. a vertical line.

4. discontinuous.

5. above the demand curve.

2

In the long run, marginal cost must equal marginal revenue for a monopolistic competitive firm, but not at the minimum point of the long-run average cost curve.

True

False

Answer 1

1

Option D

Discontinues

The marginal revenue curve is downward sloping, but it discontinues at the output level of kink of the demand curve.

2

ture

A monopolist earns zero economic profit in the long run because of free entry and exit, but the firm faces downward sloping demand curve because of the differentiated product so the MR=MC but the ATC>MC and ATC=P in the long run. It means a monopolistic competitive firm has excess capacity in the long run.