Answer to Question #52960 in Microeconomics for Yana

Question

MULTIPLE CHOICE
1. In monopolistic competition if there is profit, there is:
a. a signal for new firms to enter.
b. a motive for existing firms to increase prices.
c. proof that advertising works.
d.a motive for existing firms to decrease prices.
e. product differentiation.
2. We can represent the entry of new firms into a monopolistically competitive market by shifting the existing firms':
a. demand curves downward.
b. demand curves upward.
c. demand curves more inelastic.
d. cost curves upward.
e. cost curves downward.
3. Compared to monopoly, the market results with monopolistic competition are usually expected to be:
a. worse because consumers get fewer choices.
b. worse because consumers pay a higher price.
c. the same.
d. better because consumers get less output.
e. better because consumers pay a lower price.

Answer 1

1. In monopolistic competition if there is profit, there is:
a. a signal for new firms to enter.
2. We can represent the entry of new firms into a monopolistically competitive market by shifting the existing firms':
d. cost curves upward.
3. Compared to monopoly, the market results with monopolistic competition are usually expected to be:
e. better because consumers pay a lower price.