1. Which of the following characterizes the cost curve under monopolistic competition?

A. An increase in firms in the market increases costs

B. An increase in firms in the market decreases costs

C. Costs are unaffected by the number of firms within the market

D. Costs are precisely determined by the ratio between buyers and sellers.

2. Why are customers willing to pay a higher price under the setting of monopolistic competition?

A.Buyers typically do not understand that they pay more.

B. The asking price might be higher but through a system of kickbacks, customers get their money back.

C. Customers value higher variation and are willing to pay for the ability to choose from various options.

D. Only customers with a high willingness to pay are interested in buying anything in a monopolistic competition.

3. Long-run equilibrium in a monopolistically competitive market satisfies all the following conditions, Except:

A. zero economic profit.

B. demand equals supply

C. price equal to marginal cost

D. marginal revenue equal to marginal cost

4. Explain your answer to Question 3. Why did you reach this result? How is it sustained?

5.The output of a cartel that maximizes profits is closest to the equilibrium output of?

A.a perfectly competitive firm.

B. a monopoly

C. monopolistic competition

D. an oligopoly la Cournot

6. Are cartels normally stable? Describe why or why not.