3. Suppose your father, who is a potato farmer in Idaho, has decided that he gro

Question

3. Suppose your father, who is a potato farmer in Idaho, has decided that he grows the "best, damn potatoes in the world" In other words, he is clasming that his potatoes are dafferent than potatoes grown by other farmers If his cla is true (and he can convince consumers of this), then A he can make profits im the long-run. B he can make profits in the short-run by increasing perice and quantity C he faces a downward sloping demand curve and his qaastity decisions will have an effect on market price for bis potatoes D while he may make a profit in the short run, in the long-run competition will sull force hia profits to zero E. c and d 4. The demand curve that confronts a monopolistically competitive firms is: A less elastic than the demand curve that confronts the industry B perfectly inelastic becaose of namerous substitutes for the firna's product C. less elastic than the demand curve facing a perfectly competitizve firm D horizontal, showing that MR-P E. perfectly elastic in the long rue, driving ecceomic protits to aero 5 In a monopolistically competitive industry, a firm in long-run equilibriuns will be operating where price is A greater than average total cost (ATC) but equal to arginsal cost (MC) B. greater than ATC and greater than MC C equal to both ATC amnd MC D equal te both marginal revenue and MC E, greater than MC but equal to ATC 6 The umpertant difference between the characteristics of perfectly competitive and mosopolistically coempentive markets is that fims in monopolistically compesitive udustries A have a dowaward sloping and relatuively uselastsc demand (as ccepared to maket demand ) 8 de not try to maxinmaze profits by producing where MR-MC C sell samilar but not identical products

Explanation / Answer

3. E

Since my father patatoes are different from other producers this means that he is a part of monopolistic competitive market . In monopolistic competitive market firms earn profits in short run but in long run firms didn't earn profits.

4. C

Demand is not perfectly elastic because a monopolistic competitor has fewer rivals then would be the case for perfect competition, and because the products are differentiated to some degree, so they are not perfect substitutes.

5. C

Because in long run firm didn't earn any profits.

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