monopolistic comp

Question 1

characteristics of monopolistic competition

Answer 1

-many buyers and sellers
-slight differentiation: price makes, PED
-low barriers to entry
-good info
-non-price comp
-profit max

Question 2

short run monopolistic comp graph

Answer 2

-costs/prices/rev and quanitity
-AR and MR same, MC same, AC below ar
-MC=MR profit max
-average revenue and average cost supernormal profits

Question 3

shift to long run in monopolistic comp

Answer 3

-new firms attracted
-good information and low entry
-AR shifts down to bottom of AC or other way

Question 4

conclusions of long run monopolistic competition

Answer 4

-allocative: not being achieved p does not equal MC
-productive efficiency: not at point of average cost curve
-no dynamic efficiency