1. If a monopolistically competitive firm raises prices, it will: A) sell no out

Question

1. If a monopolistically competitive firm raises prices, it will:
A) sell no output.
B) continue to sell the same amount of output. (incorrect answer)
C) go out of business.
D) sell less output.

2. Monopolistically competitive firms are able to charge:
A) P > MC, eliminating any lost gains from trade.
B) P > MC, so output is produced at minimum per unit cost. (incorrect answer)
C) P > MC, causing an inefficiently lower level of output.
D) P = MC, maximizing social surplus.

3. Monopolistically competitive firms set price:
A) less than marginal cost. (incorrect answer)
B) equal to marginal cost.
C) greater than marginal cost.
D) sometimes greater than, sometimes less than, and sometimes equal to marginal cost.

Explanation / Answer

1Ans is C) go out of business.
If he charges a higher price then the consumers will buy from other firms
2Ans is C) P > MC, causing an inefficiently lower level of output.
Monopolitic competitive firms charge P>MC 1Ans is C) go out of business.
If he charges a higher price then the consumers will buy from other firms
2Ans is C) P > MC, causing an inefficiently lower level of output.
Monopolitic competitive firms charge P>MC causing an inefficiently lower level of output
3 Ans is C) greater than marginal cost.
Monopolistically competitive firms set price greater than marginal cost

3 Ans is C) greater than marginal cost.
Monopolistically competitive firms set price greater than marginal cost

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