1. A gas station operates in a monopolistically competitive market and is in sho
ID: 1201529 • Letter: 1
Question
1. A gas station operates in a monopolistically competitive market and is in short-run equilibrium. Suppose that a fixed cost for this firm decreases. As a result, the firm's price will _____, the firm's output will _____, and the firm's economic profit will _____.
A) increase; increase; increase
B) increase; increase; decrease
C) stay the same; stay the same; increase
D) decrease; stay the same; increase
2. An increase in the productivity of labor due to improved technology will:
A) result in a lower wage.
B) decrease the quantity of labor hired.
C) decrease the demand for labor.
D) increase the demand for labor.
A monopolistic competitor may choose to advertise in order to:
A) reduce excess capacity.
B) increase demand for its product.
C) collude more effectively with other firms.
D) produce on the upward-sloping portion of its average total cost curve.
Suppose the Herfindahl–Hirschman Index (HHI) for an industry is 900. Compared to an industry with an HHI of 10,000, this market is considered:
A) a strongly competitive market.
B) a somewhat competitive market.
C) oligopolistic.
D) monopolistic.
Explanation / Answer
1. C) stay the same; stay the same; increase
Decrease in the cost of production does not decreases the price of the commodity as monopolist firms have some control over the price of the good so they keep the price same and as in short run, firm is not able to expand its production so production remains the same and profit of the firm increases due to decrease in cost while price remains the same.
2. D) increase the demand for labor.
Demand of skilled workers increases as technology is correctly used by the skilled workers so to increase productivity demand of skilled workers increases.
3. B) increase demand for its product.
Product of monopolistic firms are differentitated and consumers have less knowledge about the product so to aware the consumers and to increase the demand of its product, firm advertise.
Related Questions
Navigate
Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.