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Question 21 0.16 pts Examining the cost, revenue, and demand curves for a monopolistic competitor reveals that, at optimal output, the demand curve lies above the average total cost curve. Which of the following is true? O There is economic profit in the long run. Firms will enter the industry in the long run. O There is not enough information because demand is an imperfect benchmark for measuring profitability O There is an economic loss in the long run. O Firms will exit the industry in the long run. Question 22 0.16 pts Demand elasticity for monopolistically competitive firms is best described as O perfectly inelastic, because differentiation is awarded with monopoly pricing O perfectly elastic, because market competition eliminates pricing power. O competitively inelastic, as the forces of competition generate demand that is not sensitive to changes in price. O relatively elastic, because differentiation offsets the perfect elasticity of a perfectly competitive market. O monopolistically elastic, as the forces of competition mitigate the market power created by significant entry barriers. Question 23 0.16 pts Which term best defines the pricing difference between monopolistic competition and competitive markets? markdown discrimination O inequity O markup O differentiation

Answer 1

a) "B"

as the demand curve is above the average total cost that means the firm is making a profit and that will allow more firms in the market to enter the industry. The answer is "B".

b) "D"

It is relatively elastic but not perfectly elastic like the perfectly competitive market because there is goods differentiation.

c) "D" the markup.