返回列表 发帖

Reading 20: Monopolistic Competition and Oligopoly-LOS c 习题

Session 5: Economics: Market Structure and Macroeconomic Analysis
Reading 20: Monopolistic Competition and Oligopoly

LOS c: Compare and contrast monopolistic competition and perfect competition.

 

 

Which of the following statements about price takers and price searchers is most accurate?

A)
In the long run, both price takers and price searchers maximize profits at the quantity corresponding to the minimum point on the average total cost curve.
B)
Price takers maximize profits at the point price = marginal revenue = marginal cost.
C)
In the long run, both price takers and price searchers will have zero economic profits.


 

Because price takers face a horizontal demand curve, they must take price as given and thus maximize profits when P = MR = MC.

The other statements are false. Although firms engaged in pure competition (price takers) maximize profits at the quantity corresponding to the minimum point on the average total cost curve (ATC) (in the long run), this is not necessarily true for price searchers. Price searchers face a downward-sloping demand curve. They produce at the quantity MR = MC and take price from the demand curve. The demand curve may be above the ATC curve. The potential allocative inefficiency of a price searcher engaged in monopolistic competition includes the social cost of not producing where P = MC. This potential allocative inefficiency may be outweighed by the benefits of product diversity. Some price searchers, (monopolists, for example), can earn positive economic profits in the long run.

One way in which monopolistic competition can be distinguished from perfect competition is that in monopolistic competition:

A)
price is greater than marginal cost.
B)
each firm faces a perfectly elastic demand curve.
C)
marginal revenue is greater than marginal cost at the quantity produced.


In monopolistic competition, price is greater than marginal cost (i.e., firms can realize a markup). In perfect competition, P = MC. Firms in monopolistic competition are price searchers, i.e., each firm faces a downward sloping demand curve. Regardless of the market structure, all firms produce the quantity at which marginal revenue equals marginal cost.

TOP

thanks a lot

TOP

返回列表