22) Assume price exceeds average variable cost over the relevant range of demand. If a monopolistically competitive firm is producing at an output where marginal revenue is $23 and marginal cost is $19, then to maximize profits the firm shouldA) continue to produce the same quantity.B) increase output.C) decrease output.D) shutdown.Answer: B
Figure 13-523) Refer to Figure 13-5.The candy store represented in the diagram is currently selling Qunits of candy at a price of Pa. Is this candy store maximizing its profit and if it is not, what would you recommend to the firm?a.D24) Both monopolistically competitive firms and perfectly competitive firms maximize profits C25) A monopolistically competitive firm maximizes profit in the short run by producing whereD26) A monopolistically competitive firm choosesA) both the quantity of output to produce and the price at which it will sell its output.B) the price of the product it sells but market forces determine the quantity it will be able to sell.C) the quantity of output to produce but the price of the product it sells is determined collectivelyby all firms in the industry.D) the price of the product it sells but the quantity of output to produce is agreed upon by all firms in the industry.Answer: B
13.3 What Happens to Profits in the Long Run?1) A monopolistically competitive industry that earns economic profits in the short run willB
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