Quiz_135 - 112 Inthelong-runequilibrium, = Answer True 112 False Diff:2 PageRef:443\/443 Topic ComparingPerfectCo

Quiz_135 - 112 Inthelong-runequilibrium, = Answer True 112...

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112) In the long-run equilibrium, both the perfectly competitive firm and the monopolisticallycompetitive firm produce the output at which MR=MC and charge a price equal to the averagetotal cost of production.112)Answer:TrueFalseDiff: 2Page Ref: 443/443Topic: Comparing Perfect Competition and Monopolistic CompetitionLearning Outcome: Micro 15: Discuss the role of differentiation in monopolistic competition in comparison toother market conditionsAACSB: Reflective Thinking113) Economists believe that consumers would be better off if markets were perfectly competitive ratherthan monopolistically competitive.113)Answer:TrueFalseDiff: 2Page Ref: 444/444Topic: Comparing Perfect Competition and Monopolistic CompetitionLearning Outcome: Micro 15: Discuss the role of differentiation in monopolistic competition in comparison toother market conditionsAACSB: Reflective ThinkingESSAY. Write your answer in the space provided or on a separate sheet of paper.114) What is meant byʺexcess capacityʺ? How does it relate to consumer utility?Answer: Excess capacity refers to a situation where a firm does not produce at the lowest possible average cost. Inother words, economies of scale have not been exhausted. Excess capacity is an inevitable consequenceof product differentiation. Firms differentiate their products in order to appeal to consumersʹvariedtastes. Consumers are, therefore, better off-they have greater utility-than they would be if companiesdid not differentiate their products. Consumers are willing to pay for the higher costs that result fromproduct differentiation.Diff: 2Page Ref: 444/444Topic: Excess CapacityLearning Outcome: Micro 15: Discuss the role of differentiation in monopolistic competition in comparison to other marketconditionsAACSB: Reflective Thinking115) Both the perfectly competitive firm and the monopolistically competitive firm produce at the output wheremarginal revenue equals marginal cost (MR=MC) but only the perfectly competitive firm achieves allocativeefficiency. Explain why this is the case.
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