1.In contrast with perfect competition, in monopolistic competition:

a.entry and exit are easy.

b.there are many firms.

c.products are differentiated.

d.a firm will produce whereMR=MCin order to maximize profits.

2.(Ref 31-10 Figure: Pricing Strategy in Cable TV Market II) Use Figure 31-10: Pricing Strategy in Cable TV Market II. The Nash equilibrium in the cable TV market occurs when:

\fPrice, MSB MPB S Po P1 P2 MSB MPB On Q1 02 QuantityA B Price, Price, marginal revenue, marginal revenue, marginal cost, marginal cost, average total cost average total cost MC ATC MC ATC P2 -. . . . MR2 T MR D MR1 D2 D1 0 Q M Q2 M Quantity (per period) Quantity (per period)Price, cost, MC marginal revenue ATC PM Profit ATCM MR D QM QuantityZoe High price Low price Zoe earns Zoe earns $1,000 per $1,500 per High week week Jake Jake price earns earns $1,000 $200 per week per week Jake Zoe earns SUJB8 907 $200 per $800 per Low week week Jake Jake price earns earns $1 500 $800 per week per week\fPrice per unit $25 and C D marginal cost Marginal 20 social cost 15 F 10 B E. A Marginal social benefit 10 20 30 40 50 60 Emissions (per period)Table: Demand Schedule of Gadgets Price of Quantity of a Gadget Gadgets Demanded $10 100 200 300 400 500 600 700 800 900 1,000