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1. Which of the following industries is most likely not going to spend time, money and...

1. Which of the following industries is most likely not going to spend time, money and effort to differentiate its product?

Select the correct answer below:

higher education

snack chips

electricity

clothing

2. True or false?

It is a basic condition for a firm that it exists only as long as it makes a profit. This is particularly true in a monopolistic competitive environment, where firms will exit the market up to the point where there are no more losses in the market.

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Answer #1

(1) (C)

Unlike the other three industries which are monopolistically competitive, electricity is a monopoly industry which does not need advertising for differentiating its product.

(2) True

A monopolistically competitive industry has free entry and exit. So, if firms make short run profit, new firms enter until each firm earns zero economic profit. If firms incur short run loss, firms exit the market until each firm incurs zero economic loss.

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