10 Questions
What is the equilibrium output level for a monopolist?
OQ
When does a monopolist enjoy normal profits?
When average revenue equals average cost
What happens to super-normal profits in monopolistic competition in the long run?
They decrease as new firms enter the market
In the short run, what condition leads a monopolist to incur losses?
Per unit cost exceeds the price
What level of output allows a monopoly firm to earn normal profits?
'OM' level of output
At what point does a monopoly firm experience equilibrium based on the text?
'P' point
What happens when per unit cost exceeds the price in monopolistic competition?
The firm incurs losses
What occurs in the long run to the profit levels of firms in monopolistic competition?
'Entry' of new firms leads to normal profits
'Super-normal profits' are typically associated with which type of market structure?
'Monopoly'
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.
Test your understanding of monopolistic competition and its features like large number of sellers, product differentiation, pricing strategies, and marketing strategies. Explore how monopolistic competition combines elements of perfect competition and monopoly.
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