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Which of the following is a difference between perfect competition and monopolistic competition? Excess capacity Zero profit condition No fixed cost in the long run No barriers to entry

Exploring Economics

8th Edition

ISBN:9781544336329

Author:Robert L. Sexton

Publisher:Robert L. Sexton

Chapter14: Monopolistic Competition And Product Differentiation

Section: Chapter Questions

Problem 1P

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Continuing with the scenario in question 1, in the long run, the positive economic profits that the monopolistic competitor earns will attract a response either from existing firms in the industry or film outside. As those films capture the original films profit, what will happen to the original films profit-maximizing price and output levels?
What is the relationship between product differentiation and monopolistic competition?
If the firms in a monopolistically competitive market are earning economic profits or losses in the short run, would you expect them to continue doing so in the long run? Why?
Make a case for why monopolistically competitive industries never reach long-run equilibrium.
Suppose that, due to a successful advertising campaign, a monopolistic competitor experiences an increase in demand for its product. How will that affect the price it charges and the quantity it supplies?