Chap 16 Questions for Review answers

Chap 16 Questions for Review answers -...

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Chap 16 Questions for Review answers 1. The three attributes of monopolistic competition are: (1) there are many sellers; (2)  each seller produces a slightly different product; and (3) firms can enter or exit the  market without restriction. Monopolistic competition is like monopoly because firms  face a downward-sloping demand curve, so price exceeds marginal cost.  Monopolistic competition is like perfect competition because, in the long run, price  equals average total cost, as free entry and exit drive economic profit to zero. 2. In Figure 2, a firm has demand curve  D 1  and marginal-revenue curve  MR 1 . The firm is  making profits because at quantity  Q 1 , price ( P 1 ) is above average total cost ( ATC ).  Those profits induce other firms to enter the industry, causing the demand curve to  shift to  D 2  and the marginal-revenue curve to shift to 
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This note was uploaded on 01/16/2012 for the course PSYCH 373 taught by Professor Marthafaircloth during the Spring '09 term at Campbell.

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Chap 16 Questions for Review answers -...

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