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Monopolistic Competition Features

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Questions and Answers

What is the equilibrium output level for a monopolist?

OQ (correct)

When does a monopolist enjoy normal profits?

When marginal cost is lower than marginal revenue

When total revenue exceeds total cost

When average revenue equals average cost (correct)

When price is equal to marginal cost

What happens to super-normal profits in monopolistic competition in the long run?

They increase due to higher demand

They decrease as new firms enter the market (correct)

They remain the same across all firms

They become negative over time

In the short run, what condition leads a monopolist to incur losses?

Per unit cost exceeds the price Signup and view all the answers

What level of output allows a monopoly firm to earn normal profits?

'OM' level of output Signup and view all the answers

At what point does a monopoly firm experience equilibrium based on the text?

'P' point Signup and view all the answers

What happens when per unit cost exceeds the price in monopolistic competition?

The firm incurs losses Signup and view all the answers

What occurs in the long run to the profit levels of firms in monopolistic competition?

'Entry' of new firms leads to normal profits Signup and view all the answers

'Super-normal profits' are typically associated with which type of market structure?

'Monopoly' Signup and view all the answers

What is the impact of an increase in firms on 'profit per firm' in monopolistic competition?

It decreases as total demand is shared among more firms. Signup and view all the answers