Price MC MC a Quantity Price Price MC ATC Po Qc Quantity a Quantity 30. Refer to

Question

Price MC MC a Quantity Price Price MC ATC Po Qc Quantity a Quantity 30. Refer to Figure3. Which of the graphs depicts the situation for a profit-maximizing firm in a monopolistically competitive market? a. Panel a b. Panel b. c. Panel c. d. Panel d 1 b faces a horizontal demand curve. If panel b depicts a profit maximizing firm, a. it is able to choose the price at which it sells its product. b. it would not have excess capacity in its production as long as it is earning zero economic profit. c. it could be operating in either a perfectly competitive market or in a monopolistically competitive market. d. the firm can always raise its profit by increasing production since consumers will buy as much as the firm can produce. 32. A monopolistically competitive firm is currently producing 10 units of output. At this level of output the firm is charging a price equal to $10, has marginal revenue equal to $6, has marginal cost equal to $6, and has average total cost equal to $12. From this information, which of the following is NOT consistent? a. firms are likely to leave this market in the long run c. the firm is currently maximizing its profit b. the profits of the firm are negative. d. the profits of the firm are positive. 33. For example, advertising that uses celebrity endorsements is most likely intended to provide a signal of product quality. Thus, critics of advertising argue that in some markets advertising may a. attract less informed buyers into the market. b. attract products of lower quality into the market. c. enhance competition in markets to an unnecessary degree. d. decrease elasticity of demand allowing firms to charge a larger markup over marginal cost.

Explanation / Answer

30. The correct answer is C. This is in the short run.

31. The correct answer is B.

32. The correct answer is B.

33. The correct answer is B.

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