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1
1.When a monopolistically competitive firm is in long-run equilibrium, it obtains normal profit.ii. In the long run, an oligopolist usually obtain normal profit.
a.Both statements above are true
b.Both statements above are wrong
c.Statement i is wrong and statement ii is true
d.Statement i is true and statement ii is wrong
2.Firms in monopolistic competition resemble monopolies in that both types of Firms
a.possess barriers to entry that keep potential rivals out of the market
b.charge prices higher than their marginal costs
c.produce their output so that their average cost is minimized
d.earn positive economic profits in the long run
3.Refer to Figure . If the firm chooses to charge the four prices shown on the figure instead of a single price, P0, the firm practices:
a.Second degree price discrimination
b.First degree price discrimination
c.Third degree price discrimination
d.Perfect price discrimination
4.Which statement is false?
a.The Lerner’s index is non-zero for the monopolistic competitive firms
b.Consumer surplus under monopoly is zero
c.MC=MR at the profit maximizing output for the monopolistic and competitive firms
d.Producer surplus under monopoly is non-zero
Expert Solution
1)
Monopolistic competition has both the features of the monopoly game and the competition and hence in the long run free entry and exit of the firms are allowed such that there will be no economic profit which mean there will be normal profit.
But oligolistic has not necessarily the features of competition like cournot or stackelberg. Hence in the long run there can be super normal profit.
Hence correct option is D.
2)
Monopolistic has feature of the monopoly i.e. the demand curve is downward sloping and profit maximize at MR = MC & hence price is greater than the MC as demand curve is greater than the MC.
Hence the correct option is B.
3) figure is not provided.
4)
Both consumer surplus and producer surplus is there in the monopoly unless there is no perfect price discrimination.
Hence the false statement is B.
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