10. Examples of monopolistically competitive markets include the markets for A. postage stamps and wheat. B....

10. Examples of monopolistically competitive markets include the markets for

A. postage stamps and wheat.

B. restaurant dining and laundry services

C. furniture and used cars in a large city.

D. All of the above are correct.

E. B and C, only

11. In a monopolistically competitive industry, price is

A. above marginal cost since each firm is a price setter.

B. equal to marginal cost since each firm is a price taker.

C. below marginal cost since each firm is a price taker.

D. always a fraction of marginal cost since each firm is a price setter.

E. always a fraction of marginal cost since each firm is a price taker.

12. Which of the following is true regarding the production and pricing decisions of monopolistically competitive firms? Monopolistically competitive firms choose the quantity at which marginal cost equals ________ and then use the _________ curve to determine the price that is consistent with this particular quantity.

A. average total cost; demand

B. average variable cost; demand

C. average total cost; supply

D. marginal revenue; demand

E. marginal revenue; supply

Solutions

Expert Solution

10. Examples of monopolistically competitive markets include the markets for

B. Restaurant dining and laundry services

C. Furnitures and used car in a large city.

Option E. Is correct.

11. In a monopolistically competitive industry, price is

A. Above the marginal cost since each firm is a price setter.

12. Which of the following is true regarding the production and pricing decisions of monopolistically competitive firms?

Monopolistically competitive firms choose the quantity at which marginal cost equals marginal revenue and then use the demand curve to determine the price that is consistent with this particular quantity.

Note: Monopolistic industry has large number of firms and they have some influence over the market price that is they have market power and hence they are price maker / setter.

Rahul Sunny answered 1 year ago

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