6. A monopolistically competitive firm is similar to a perfectly competitive fir
ID: 1120509 • Letter: 6
Question
6. A monopolistically competitive firm is similar to a perfectly competitive firm in that: a. both have some control over the price they receive for their products b. both set price above marginal cost. c. neither is guaranteed to earn positive economic profit in the short rurn d. uses product differentiation to obtain market power. Use the graph for a monopolistically competitive firm to answer questions 7 through 10. MC ATC 8.75 AVC 3.75 Demand MR 0 800 1,200 Output 7. Following the profit-maximizing/loss-minimizing rule, this firm will produceunits of output and charge a price of a. 800; $3.75 b. 800; $750 c.800;$8.75 d. 1200:$750 8· This firm's total fixed costs (TFC) are equal to: a. $2,000. b $3,000. . $4,000. d. $5,000. 9. In the short run, this firm: a. b. earns a positive economic profit earns zero economic profit. it is larger than the amount it would lose if it shut down and paid fixed costs. incurs an economic loss that is smaller than the amount it would lose if it shut d. down and paid fixed costs As the market in which this firm operates adjusts to long-run equilibrium, it is most that some firms will a. enter, increase b. enter, decrease 10. likely this market, causing a(n)i the demand faced by a c. leave; increase d. leave; decrease Chapter 13 Assignments 288Explanation / Answer
6.
The similarity between monopolistic competition and perfect competition are that both can make a positive economic profit and negative economic profit in the short-run but both earn zero economic profit in the long-run.
Therefore it can be said that option c is the correct answer.
and option c is; neither is guaranteed that to earn a positive economic profit in the short-run.
7.
The profit-maximizing rule for the monopolistically competitive firm is;
MR=MC
therefore the quantity will be 800 units and price will be determined corresponding to this quantity by the demand curve.
Hence price will be $7.50
Hence option b is the correct answer.
(8)
At this quantity total fixed cost = TC - VC
=ATC*Q - MC*Q
=8.75*800 - 3.75*800
=7000-3000
=$4000
Hence option C is the correct answer.
(9)
In short-run the firm makes economic loss= (ATC- P)*Q
=(8.75-7.50)*800
=1.25*800
=$1,000
Total fixed cost=$4000
It means if firms shut -down, then the economic loss will be smaller than the loss due to Total Fixed cost.
hence option d is the correct answer.
# According to Chegg guideline i have solved first four question.
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