out in Question 1, wou In each of the games set outcome be likely to change it t
ID: 1130992 • Letter: O
Question
out in Question 1, wou In each of the games set outcome be likely to change it the game were repea In monopolistic competition, which one of the f a) The outcome is the same as in perfect com the long run b) Each producer faces a downward sloping dema curve, sets MC MR and makes no profit in the c) Each producer sets marginal cost equal to price. d) Each producer sets MC equal to price in the long run but not in the short run. e) Each firm in the industry produces where its marginal cost is negative Explain the short-run equilibrium condition for a firm under monopolistic competition. If this is characterized by the existence of pure profit, what will happen to bring about the long-run equilibrium of the industry? Give examples of barriers to entry and explain why existing firms can benefit from the creation of such barriers What is a Nash equilibrium and why is it self-polic 2 Why do you think that non-price competition is an important factor where there is a small group of interacting competitors?Explanation / Answer
3. Option ‘b’ is correct.
Because in monopolistic competition the process of new entry will reduce economic profits to zero in long run.
5. The factors which make entry of new firms in the market difficult are called as barriers to entry. Few of them are given below.
a) Government regulations: sometimes government acts as a barrier by making licensing process difficult or delaying necessary approvals for starting business.
b) High entry cost: Some industries require large investments making it difficult to enter in the market.
c) Brand loyalty: Some established firms have high brand loyalty. This means consumer are satisfied with existing brand or products which make new firm difficult to market their products.
d) Technology patents: Sometimes the technology needed for producing better quality products is protected by a patent. This makes new firm difficult to enter in the market.
Existing firms get benefitted with these barriers as they face less competition. The market share of existing firms is not reduced & they will be able to maintain the profits.
6. Nash equilibrium:
Nash equilibrium is a concept in game theory mostly used to predict the outcome of a strategic interaction. It is a solution to game with multiple players in which every participating player has no benefit if he changes his strategy. It’s an outcome in which every player is acting in their own interest optimally & rationally.
It is self-policing because every player acts in self-interest based on rational decisions.
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