Book: economics a contemporary introduction Chapter 10

Questions for Review 1. Characteristics of Monopolistic Competition Why does which is what would occur if the industry were perfectly the demand curve facing a monopolistically competitive firm competitive. Assuming that the cost curves for each firm are slope downward in the long run, even after the entry of the same whether the industry is perfectly or monopolistically S new firms? competitive, answer the following questions. 2. Product Differentiation What are four ways in which a firm a. Why don't perfectly and monopolistically competitive firms can differentiate its product? What role can advertising play produce the same equilibrium quantity in the long run? in product differentiation? How can advertising become b. Why is a monopolistically competitive industry said to a barrier to entry? be economically inefficient? 3. To Produce or Not to Produce What's the difference between c. What benefits might cause consumers to prefer the monopo- shutting down and going out of business? listically competitive result to the perfectly competitive result? 4. Zero Economic Profit in the Long Run In the long run, a mo- 5. Varieties of Oligopoly Do the firms in an oligopoly act inde- nopolistically competitive firm earns zero economic profit, pendently or interdependently? Explain your