Question

16. If firms in a monopolistically competitive market are earning positive profits, then a. firms will likely be subject to regulation. b. barriers to entry will be strengthened. c. some firms will exit the market. d. new firms will enter the market. 17. As new firms enter a monopolistically competitive market, profits of existing firms a. rise, and product diversity in the market decreases. b. decline, and product diversity in the market increases. c. rise, and product diversity in the market increases. d. decline, and product diversity in the market decreases. 18. In monopolistically competitive markets, free entry and exit suggests that a. some firms will be forced to incur economic losses in the long run. b. the market structure will eventually be characterized by perfect competition in the long run. c. some firms will be able to earn economic profits in the long run. d. all firms earn zero economic profits in the long run. 19. In the long run, a profit-maximizing firm in a monopolistically competitive market operates at a. efficient scale. b. a level of output at which average total cost is rising. c. the level of output at which total revenue is maximized. d. a level of output at which average total cost is falling. 20. Compared to other firms, firms that sell highly differentiated products likely incur significant costs associated with a. the product-variety externality. b. intermediate materials. c. advertising d. taxes and regulation 21. In which of the following product markets are we likely to observe the largest amount of advertising? a. perfectly competitive markets b. markets in which there is very little difference between different firms' products c. markets with highly differentiated products d. markets in which industrial products are sold

Answer 1

16) Ans (6) Barries to entry would cause ponline profits to monopolistically competitive spim. (17) Ans (6) There will be decline in profits of from. and entry of new from would give rise to the diversity of products. 18) Ans! (d) free entry and exit would bring about the normal profit over athe long run. 19) Aus: Cd There would be output Corresponding to de reaking AC 20 Aug (co Advertising is considered best measure to eure the new customers. 217 Ans (2) froms will highly differentiated products are likely to go for heavy advertising