Question 6 (1 point) The possibility of a long-run equilibrium for a monopolisti

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Question 6 (1 point)

The possibility of a long-run equilibrium for a monopolistically competitive firm wherein economic profits are zero is based upon the assumption of:

Question 6 options:

a. rising marginal costs.

b. a perfectly elastic demand curve.

c. the weakness of barriers to entry.

d. product differentiation.

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Question 7 (1 point)

"Mutual interdependence" means that each oligopolistic firm:

Question 7 options:

a. faces a perfectly elastic demand for its product.

b. must consider the reactions of its rivals when it determines its price policy.

c. produces a product identical to the products produced by its rivals.

d. produces a product similar but not identical to the products of its rivals.

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Information

Answer the following questions on the basis of the following data referring to a pure monopolist.

Question 8 (1 point)

Equilibrium price for the monopolist will be:

Question 8 options:

$5.00

$2.90

$3.35

$3.85

$4.50

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Question 9 (1 point)

The equilibrium level of output will be:

Question 9 options:

4 units

8 units

7 units

6 units

5 units

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Question 10 (1 point)

The monopolist will realize a:

Question 10 options:

profit of $8.50

profit of $7.50

profit of $16

a loss of $6.50

a. rising marginal costs.

b. a perfectly elastic demand curve.

c. the weakness of barriers to entry.

d. product differentiation.

Explanation / Answer

Question 6: (c) the weakness of barriers to entry.

In a monopolistically competitive industry, output at which a firm produces is where MR = MC and the price is detemined according to the demand curve. Howvever in the long run in this type of market structure the economic profit or losses are removed by entry or by exit of new firms and hence the firms have zero economic profit.

Question 7: (b) must consider the reactions of its rivals when it determines its price policy.

Mutual interdependence implies when action of one firm imapcts all other firms. In an oligopoly market, if one firm changes its price, it impacts all other firms in the industry as there are very small number of sellers in the industry.

Answered above questions in detail as per policy, only first question needs to be answered, still answering the rest three without explaining.

Question 8: Answer: $ 4.50

Question 9: Answer: 5 units

Question 10: Answer: Profit of $16

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