For each of the following characteristics, say whether it describes a monopoly firm,

For each of the following characteristics, say whether it describes a monopoly firm, a monopolistically competitive firm, both, or neither.

Characteristic: Monopoly /Monopolistically Competitive

1. Faces a downward-sloping demand curve

2. Has marginal revenue less than price

3. Faces the entry of new firms selling similar products

4. Earns economic profit in the long run

5. Equates marginal revenue and marginal cost

6. Produces the socially efficient quantity of output

Solutions

Expert Solution

Answer:

1) Both a firm in monopolistic competition and a monopoly firm face a downward-sloping demand curve.

2) Both a firm in monopolistic competition and a monopoly firm have marginal revenue that is less than price.

3) A firm in monopolistic competition faces the entry of new firms selling similar products.

4) A monopoly firm earns economic profit in the long run.

5) Both a firm in monopolistic competition and a monopoly firm equate marginal revenue and marginal cost.

6) Neither a firm in monopolistic competition nor a monopoly firm produce the socially Efficient quantity of output.

Rahul Sunny answered 2 years ago

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