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Cards In This Set
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Are most monopolistic competitive firms able to earn economic profits in the long run?
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No
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Monopolistic competition
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A market structure in which barriers to entry are low and many firms compete by selling similar but not identical products
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Average revenue=
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TR / Q
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Average revenue is always equal to
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Price
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Two effects of price cut to sell more of an item
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Output effect- good thing: sell one more item
price effect-bad thing: receive less money |
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Only ________ markets have MR curves the same as demand curves
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Perfectly competitive
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A monopolistic competitve firm produces where
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P > MC
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When the demand curve is tangent to the ATC curve in the long run
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The firm is breaking even
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If more options
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Long run demand curve more elastic
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Do monopolistically competitive firms experience economic profits or losses in the long run?
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Neither
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In the long-run equilibrium, both perfect and monopolistic competition
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earn zero economic profits
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Two differences between long-run equilibrium of perfect and monopolistic
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Monopolistic firms charge a price greater than marginal cost
monopolistic firms do not produce at minimum average total cost |
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Excess capacity
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If it increased its output it could produce at a lower average cost
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Are productive efficiency and allocative efficiency achieved in both perfect and monopolistic competition?
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Perfect- both
monopolistic- neither |
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Why is the demand curve sloped downward in monopolistic competition
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Because the good or service the firm is selling is differentiated from the goods or services being sold by competing firms
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