13. If a monopolistic competitor is producing an output for which marginal reven
ID: 1207248 • Letter: 1
Question
13. If a monopolistic competitor is producing an output for which marginal revenue is $40 and marginal cost is $32 to maximize profits the firm should
A. decrease the level of output.
B. keep the level of output constant.
C. continue to make $8 per unit.
D. increase the level of output.
14. A monopolistic competitor will not make an economic profit unless
A. it engages in price discrimination.
B. its marginal revenue is greater than its marginal cost.
C. it faces an inelastic demand curve.
D. its price is greater than its average total cost.
15. The definition of monopolistic competition includes
A. few firms and ease of entry and exit.
B. few firms and barriers to entry and exit.
C. many firms and barriers to entry and exit.
D. many firms and ease of entry and exit.
16. Characteristics of monopolistic competition include all of the following except
A. significant barriers to entry.
B. a relatively large number of sellers and buyers.
C. small market share for each seller.
D. differentiated products.
Explanation / Answer
13) increase the level of output.( to achieve equilibrium output MR=MC and for that output has to be increased so that MR from every additional unit deceases and MC increases.)
14) A monopolistic competitor will not make an economic profit unless its price is greater than its average total cost. as we know that monoplist achieves equilibrium output by equating MR=MC but price is derived from average revenue curve that will allways be greater than average total cost at equilibrium output.
15) The definition of monopolistic competition includes many firms and ease of entry and exit. since monopolistic competition is different from monopoly structure in the sense that there many sellers and no barriers to entry and exit.
16) Characteristics of monopolistic competition include all of the following except significant barriers to entry. monopolistic competition can't resist firms to enter the market. It ensures that there are neither abnormal profits nor any abnormal losses to a firm in the long run.
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