Question

Now that you have studied monopolistic competition, let's see how well you can distinguish a firm in a monopolistically competitive market from a firm in a perfectly competitive market. Given the description of the firm below, decide whether it applies to monopolistic competition, perfect competition, or both. You may have to adjust the scroll bar to see the complete list.
1. a firm that produces with excess capacity in
2. a firm that has a firm that sets price greater than marginal cost
3. a firm that may earn an econom profit or loss in the short run
4. a firm that faces a downward sloping demand curve.
5. a firm that that maximizes profits profit in the long by producing where MR = MC

Answer 1

Answer:

Monopolistic Competition:

4. a firm that faces a downward sloping demand curve.

Perfect Competition:

1. a firm that produces with excess capacity in

3. a firm that may earn in an economy profit or loss in the short run

5. a firm that that maximizes profits profit in the long by producing where MR = MC

Both:

2. a firm that has a firm that sets price greater than marginal cost.

Explanation: