Question

Firms that sell used cars in a very small town are more likely to exist in a monopolistic competitive market than sellers of used cars in a large city.

True or False

A profit-maximizing monopolistic competitor charges a price of $40. The intersection of the marginal revenue and marginal cost curves occurs where output is 15,000 units and marginal cost is $28. Average total cost for 15,000 units of output is $43. As a result, the monopolistic competitor experiences a profit of more than $45,000.

True False

If firms in the monopolistic competitive market are making economic losses, then some firms are encouraged to exit the market in the long run and the demand curves for existing (remaining) firms will shift to the left as they gain customers

true or False

Answer 1

a) False, these firms will be in a monopoly rather than being in a monopolistic competition because of lack of competition in these market.

b) False, as the price of the goods are less than the cost of the goods the firm in the market will be making a loss in the market rather than making a profit.

c) False, as they are making losses they will exit the industry in the long run and that will shift the demand curve of the existing industry to the right not left.