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1.
Profit-maximizing firms in monopolistically competitive markets:
always charge a price that is equal to marginal cost.
always charge a price that is equal to average total cost.
tend to earn positive economic profit in the long run.
sell products that are very similar to each other.
2.
For monopolistically competitive firms in long-run equilibrium, economic profit is:
positive because their products are unique.
positive because their products are differentiated.
zero because of strong barriers to entry.
zero because there are no barriers to entry.
3.
If a monopolistically competitive firm is producing where marginal revenue is equal to
marginal cost but price is greater than marginal cost, the firm:
should decrease output to increase profit.
should increase output to increase profit.
should continue to produce at this point because it is already maximizing profit.
could increase profit by either increasing or decreasing output.
4.
In the long run, it is true that monopolistically competitive firms produce where:
P > MC and P > minimum average cost
P > MC and P = minimum average cost
P < MC and P < minimum average cost
P < MC and P = minimum average cost
5.
A monopolistically competitive firm:
produces where P > ATC in the long run.
earns positive economic profits in the long run.
produces where MR = MC to maximize profit.
All of the above are true
6.
Monopolistically competitive firms:
persistently earn positive economic profits in both the short run and the long run.
may earn either profits or losses in the short run, but tend to earn zero
economic profits in the long run.
tend to incur persistent losses in both the short run and the long run.
earn zero economic profits in the short run but incur losses in the long run.
