Question

In: Economics

Which of the following was listed as a characteristic ofMonopolistic Competition?Few sellers.A standardized...

Which of the following was listed as a characteristic of Monopolistic Competition?

		Few sellers.
		A standardized product.
		Barriers (blocked) entry and exit.
		Some control over price.
		All of the above are characteristics of monopolistic competition.

Which of the following is true?

		Monopolistically competitive industries may have a concentration ratio of 100%.
		Monopolistically competitive firms have a standardized product.
		Monopolistically competitive firms are price makers but mutually dependent upon other firms with respect to how they set price.
		All firms in a monopolistically competitive industry will make zero economic profits in the long run.
		All of the above are true.

Which of the following is true about a monopolistically competitive firm?

		They face a perfectly inelastic demand curve
		Their marginal revenue curve rises as they produce increasing amounts of a product
		They have a unique cost structure as compared to all other firms
		If they are profit maximizing they will produce where marginal revenue equals marginal cost
		There marginal revenue curve is the same curve as their demand curve

Which of the following is a positive aspect resulting from the monopolistically competitive market structure?

		Increased international competitiveness
		Increased technological advancement
		Greater product variety
		Limit pricing keeping the price low
		All of the above

Expert Solution

1. D

some control over pricce

since the products are close substitutes of each other, if a firm lowers the price of the products,then the customers of the other products will switch over to it.so, in a monopolistic competition the firm is not a price taker but has some control over the price.

2. D

a zero economic profit means the firms accounting profit is equal to what its resources could earn in their next best use. Monopolistic competitors can make an economic profit or loss in the short run, but in the long run entry and exit will drive these firms towards a zero economic profit outcome.

3. D

if the firm is maximising its profits, then they would produce upto where the marginal revenue equals marginal costs.

4. D

in order sell more units of the products and earn more profit it has to lower the price of the product.

Rahul Sunny answered 2 years ago

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