67: Intro To Monopolistic Competition

Question 1

monopolistic competition

Answer 1

many producers competing for the same consumers but offering differentiated products

Question 2

short run

Answer 2

the number of firms is a given
maximizes profits where MR =MC
can be profitable

Question 3

long run

Answer 3

the industry will not be in the long run until the b persistent loses have been eliminated by the exit of some firms, and the persistent profits have been eliminated by the entry of new firms

Question 4

zero profit equilibrium

Answer 4

the long run occurs when there is no more entry or exit, and every firm earns zero profit
demand curve tangent to ATC curve

Question 5

Why is P > MC in monopolistic competition

Answer 5

more sales at the posted price increases revenue more than it increases costs

Question 6

excess capacity

Answer 6

monopolistic competitors fail to produce where average costs are minimized

Question 7

is monopolistic competition good?

Answer 7

trade off between higher average total cost and product diversity