Indicate what the right answer is by saying a, b,c, or d for each question. 1. T

Question

Indicate what the right answer is by saying a, b,c, or d for each question.

1. The biggest difference between perfectly competitive markets and monopolistically competitive markets is that: there are fewer firms under monopolistic competition than under perfect competition. firms' products are differentiated under monopolistic competition but are identical under perfect competition. there are barriers to entry under monopolistic competition but none under perfect competition. firms make an economic profit in the long run under monopolistic competition but not under perfect competition.

Explanation / Answer

Ans 1. there are fewer firms under monopolistic competition than under perfect competition.

Ans 2. the average variable cost curve.(shut down prices are minimum of AVC)

Ans 3. its marginal cost curve.

Ans 4. Profit

Ans 5. the quantity produced by the firm and the price it charges will both fall.

Ans 6. the quantity produced by the firm and the price it charges will both rise.

Ans 7. the firms' minimum average fixed cost

Ans 8. Perfectly elastic.

Ans 9. Perfectly elastic

Ans 11. are determined by market supply and demand.

Ans 12. price equals marginal revenue at all quantities.

Ans 13. MR – MC (In perfect competition, P=MC)

Ans 14. produce where price equals marginal cost so long as the price is higher than minimum average variable cost.

Ans 15. the firm is making an economic profit.

Ans 16. the firm will shut down production.

Ans 17. the average variable cost curve.

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