AP Lesson: Monopolistic Competition, Price Discrimination
In the long run, a monopolistically competitive firm is allocatively inefficient because the firm will
produce only when marginal cost is greater than marginal revenue
produce only when marginal revenue is greater than marginal cost
charge a price greater than the marginal cost
earn positive economic profits
experience economic losses
Use this graph for the question below
The graph above depicts cost and revenue curves for a typical firm in a monopolistically competitive industry. Suppose that the firm is producing OM units of output. To maximize profits, it should do which of the following to output and price?
Increase output, decrease price
Increase output, increase price
Decrease output, increase price
No change in output, increase price
No change in output, no change in price
Compared with firms in a perfectly competitive industry, firms in a monopolistically competitive industry are inefficient because they
make economic profits in the long run
do not lower the product price if input prices fall
restrict their output level to maximize profits
charge the highest price that consumers will pay
waste resources by producing an excess amount of output
Which of the following is NOT a characteristic of monopolistically competitive markets?
Relatively easy market entry
Substantial product advertising
A large number of both buyers and sellers
Long-run economic profits
A product that is different from other similar products is
both B and C
Which of the following would not be sold in a monopolistically competitive market?
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