intro to microecnomics, easy, not enough time to do! twenty questions, need soon.
Sample question:
Unlike a perfectly competitive firm, a monopolistic competitor operates in the long run at a point at which
a. P = ATC.
b. MR = MC.
c. unit costs are not minimized.
d. profits are zero.
P = ATC.
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To answer this question, you need to have a basic understanding of the nature of a monopolistic competitor and how it differs from a perfectly competitive firm.
First, let's explain the key concepts involved:
1. Perfectly competitive firm: In a perfect competition market, there are many small firms that produce identical goods or services. These firms are price takers, meaning they have no control over the market price and must accept the going market price for their products.
2. Monopolistic competitor: In contrast to a perfectly competitive firm, a monopolistic competitor operates in a market with some degree of product differentiation. This means that the goods or services they offer are not identical to their competitors'. To differentiate their product, they may focus on branding, packaging, or unique features.
Now, let's analyze the answer choices:
a. P = ATC: This condition does not hold true for a monopolistic competitor. In the long run, a monopolistic competitor will set their price above their average total cost (ATC) because they have some degree of market power due to product differentiation.
b. MR = MC: This condition is true for both perfectly competitive firms and monopolistic competitors in the long run. In order to maximize profits, firms in both markets will produce where marginal revenue (MR) equals marginal cost (MC).
c. Unit costs are not minimized: This condition is related to the concept of perfect competition. In a perfectly competitive market, firms will produce at the point where their average total cost (ATC) is minimized. However, this is not necessarily true for a monopolistic competitor.
d. Profits are zero: This condition does not hold true for a monopolistic competitor. In the long run, monopolistic competitors can earn positive economic profits if they are successful in differentiating their product and attracting customers.
Based on the explanations above, the correct answer to the question is (b) MR = MC. A monopolistic competitor operates in the long run at a point where marginal revenue equals marginal cost.
Note: It's important to allocate enough time to study and understand the concepts of microeconomics thoroughly. However, if you are short on time, focusing on the key concepts and practicing with sample questions can still help you grasp the fundamentals. Remember to consult your textbook or lecture notes for a more in-depth understanding and always seek clarification from your instructor if needed.