How does a firm in monopolistic competition determine its price and quantity? What type of profit can it earn in the short run and the long run?
What will be an ideal response?
The firm produces where its marginal cost equals its marginal revenue. Then the price is determined from the demand curve and is the highest price at which people will buy the quantity produced. The firm can earn an economic, a normal profit, or suffer an economic loss in the short run. In the long run, the firm cannot earn an economic profit; it can only earn a normal profit.
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Which of the following statements is true?
a. All people in poverty are on welfare. b. Unemployment compensation is an example of an in-kind transfer. c. Temporary Assistance to Needy Families (TANF) is an example of a cash payment made by government to the impoverished. d. After cash assistance and in-kind transfers are considered the distribution of income in the United States is more unequal. e. All of these.
Which of the following is not a characteristic of a perfectly competitive market structure?
a. The firm is a price-taker. b. The firm is a profit maximizer. c. The firm's demand curve is horizontal. d. The market demand is downward sloping. e. The firm can earn an economic profit in the long run.