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Monopolistic competition questions

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Due to the existence of a large number of similar, but not identical, substitutes in most communities, the market for chiropractors is best considered
a. an oligopoly
b. perfect competition
c. monopolistic competition
d. a monopoly

my answer is d

The demand curve for a firm under monopolistic competition is
a. U-shaped
b. upward sloping
c. downward sloping
d. vertical

mmm it is A

A firm in monopolistic competition maximizes its profit by producing at the level at which
a. MC = ATC
b. MC = AR
c. MC = MR
d. MC = P

D is my answer

If a firm under monopolistic competition is producing a quantity that generates MC > MR, then the marginal decision rule tells us that profit
a. can be increased by increasing production
b. can be increased by decreasing production
c. can be increased by decreasing the price
d. is maximized only if MC = P

my answer is A

Product differentiation under monopolistic competition means that each firm
a. charges slightly different prices
b. has a pure monopoly
c. maximizes profit where MC = P
d. faces a horizontal demand curve

my answer is C

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Solution Preview

The key to the first question are the words "large number." A monopoly is by definition only one seller. The market for chiropractors would be most like monopolistic competition.

Demand curves are generally horizontal, meaning that the firm is a price taker, or downward sloping, meaning that a price drop will cause an increase in demand. I can't think ...

Solution Summary

Multiple choice market structure questions

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Cost Curves in Perfect Competition and Monopolistic Competition

C7 TQ3) The following graph (see attachment) shows the cost curves for a perfectly competitive firm. Identity the shutdown point, the breakeven point, and the firm's short-run supply curve.

C7 TQ5) Draw graphs showing a perfectly competitive firm and industry in long-run equilibrium.
(a) How do you know that the industry is in long-run equilibrium?
(b) Suppose that there is an increase in demand for this product. Show and explain the short-run adjustment process for both the firm and the industry.
(c) Show and explain the long-run adjustment process for both the firm and the industry. What will happen to the number of firms in the new long-run equilibrium?

C8 TQ7) The following graph shows a firm in a monopolistically competitive industry. See attached file for graph.
(a) Show the firm's short-run profit-maximizing quantity and price. Is the firm making a profit?
(b) Carefully explain what will happen in the industry over time, and draw a graph of a monopolistically competitive firm in long-run equilibrium.

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