MONOPOLISTIC COMPETITION Profit-maximizing firms in monopolistically competitive
ID: 1111635 • Letter: M
Question
MONOPOLISTIC COMPETITION Profit-maximizing firms in monopolistically competitive markets: always charge a price that is equal to marginal cost. b. c. sell products that are very similar to each other d. tend to earn positive economic profit in the long run. always charge a price that is equal to average total cost. For monopolistically competitive firms in long-run equilibrium, economic profit is: a. positive because their products are un C, positive d. zero because of strong barriers to entry sitive because their products are differentiated. ro because there are no barriers to entry If a monopolistically competitive firm is producing where marginal revenue is equal to marginal cost but price is greater than marginal cost, the firm: a. should decrease output to increase profit. b. should increase output to increase profit. c. should continue to produce at this point because it is already maximizing profit. d. could increase profit by either increasing or decreasing output. In the long run, it is true that monopolistically competitive firms produce where: a. P>MC and P> minimum average cost b, P> MC and P minimum average cost c. PExplanation / Answer
1.
B.
It happens in the long run.
2.
C.
Firms can entry or exit that makes the economic profit to the zero in the long run.
3.
C.
For profit maximization output, MR = MC is the criteria in Monopolistic competition
4.
B.
Price will be higher than the MC, but equal to the ATC in the long run so that economic profit is zero.
5.
C.
For profit maximization, MR = MC in Monopolistic competition.
6.
B
Monopolistic firms cannot earn positive economic profit in the long run, though there can be positive or negative profit in the short run.
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