Answered: 5. MONOPOLISTIC COMPETITION. Determine…

Microeconomics A Contemporary Intro

10th Edition

ISBN:9781285635101

Author:MCEACHERN

Publisher:MCEACHERN

Chapter10: Monopolistic Competition And Oligopoly

Section: Chapter Questions

Problem 4QFR

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Transcribed Image Text:5. MONOPOLISTIC COMPETITION. Determine whether each of the following statements about monopolistically competitive (MOCO) firms is TRUE or FALSE. Focus your attention on the underlined part. A MOCO market features free entry in the short run. A MOCO firm sometimes produces where demand is tangent to average total cost. A MOCO firm faces a residual demand curve that shifts rightward when other firms enter the market. A MOCO firm sets MC-MR=0 to maximize profit. A MOCO firm typically advertises or uses a brand name to differentiate its product. A MOCO firm is like an oligopolistic firm in that both face residual demand curves. A MOCO firm never produces at minimum average total cost in the short run. а. b. с. d. е. f. g. h. Products in a MOCO market are perfect substitutes. MOCO firms tend to produce too many units, resulting in too few product choices (i.e., insufficient product differentiation). j. i. A MOCO firm can suffer an economic loss in the short run and can enjoy positive economic profit in the long run. Your choices as the manager of a MOCO firm include input mix, production (output), and spending on advertising. k.

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