4. The demand curve shown below has four points depicting possible total market

Question

4. The demand curve shown below has four points depicting possible total market oligopoly outcomes of quantity and price. For the given demand and price coordinates labeled A-D, pick the matching oligopoly models that lead to these comparative outcomes. Price B C D Quantity A. A = Bertrand: B = Cournot: C= Stackelberg: D= Shared Monopoly B. A = Cournot: B = Bertrand: C= Stackelberg: D= Shared Monopoly C. A = Shared Monopoly: B= Cournot: C= Stackelberg: D = Bertrand D. A = Shared Monopoly: B = Cournot: C= Bertrand: D= Stackelberg ECON 3501 Test 3 (120817) Page 1 5. Suppose a monopolistically competitive firm is in long-run equilibrium. If its marginal cost equals $10, and its marginal revenue plus its economic profit equal one-half of its price, its price equals L. (USE ANSWER SHEET) 6. Suppose a monopolistically competitive firm is in long-run equilibrium. If its marginal cost equals $10, and its marginal revenue plus its economic profit equal one-half of its price, its marginal revenue equals 7. Expenditures on advertising A. always lower average total cost because whenever a firm advertises, it increases the quantity sold B. can lower average total cost if the advertising increases the quantity sold by a large enough amount C. cannot lower average total cost because when a firm advertises it increases its costs D. are variable costs so do not affect the average total cost 8. Because consumers value product variety, A. society must be more efficient with monopolistic competition than with perfect competition. B. the inefficiency and deadweight loss created by monopolistic competition is offset. C. in the long run, monopolistically competitive firms earn an economic profit. D. monopolistically competitive industries are efficient.

Explanation / Answer

4 c is correct

Shared Monopoly has maximum price and hence maximum profit then comes cournot Monopoly then stackelberg Monopoly then bertrand.

5. MC = $10

MR+ ECONOMIC PROFIT = 1/2 P

MC + 0= 1/2 P. (because MR= MC)

10= 1/2P

so, p= 20

6. MR = MC = $10

This is because in monopolistic market the equilibrium condition is that MR= MC

7. A. is correct answer

Expenditure on advertising cost shifts average total cost report due to which total output increases and price decreases

8.b is correct answer

Monopolistic competition is not efficient in comparison to perfect market competition but as consumer values product variety more than the price so these disadvantages are offset.

thanks

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