1. Consider the market for sneakers. Does it fit the monopolistic competition model? How important is product loyalty in this market?
2. What is the similarity between a long-run equilibrium in a monopolistically competitive market with a monopoly? What is the difference?
3. Monopolistically competitive markets have two main sources of inefficiency: mark-up over marginal cost, and externalities associated with entry of new firms. Explain how these inefficiencies can have an impact on total welfare (There are both positive and negative externalities associated with firms entering the market.)