What are two real-world complications with the long-run conclusion about the representative firm in the model of monopolistic competition?
What will be an ideal response?
In the long run, the representative firm in monopolistic competition should break even and earn only a normal profit. This conclusion, however, may not be true for all firms in the real world. First, economic profit may accrue in the long run because there may be some degree of monopoly power that is long term. Some firms may earn some economic profits even in the long run if the firm has a product or service that is not easy to duplicate or it has an extremely good location. Second, product differentiation creates a financial barrier to entry that may not be easy to overcome.
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Using a graph, illustrate what the market effects of a quota, a tariff, or a complete ban on imports would be
What will be an ideal response?
Which of the following is necessary for a monopolist to price discriminate between groups?
A) The groups are identifiable. B) The groups have different willingness to pay. C) A customer from one group cannot resell to a customer in another group. D) All of the above conditions are necessary for the monopolist to price discriminate.
Which of the following is not considered a factor that influences supply?
A) Technology. B) Production taxes and subsidies. C) The number of buyers. D) Resource prices.
Increase in business taxes will ________ the expenditure curve:
A) decrease.
B) increase.
C) not change.
D) none of the above.