Subpart (a):
How monopolistic competition likes a monopoly and a competition.
Subpart (a):
Explanation of Solution
The market is a structure where there are buyers and sellers who sell and the exchange of goods and services between the buyers and sellers exchanges goods and services. The price is determined by the interaction of the
The Monopoly is a market structure where there is only one seller selling the unique product and the seller faces the downward sloping demand curve. The competitive market is a structure where there are many sellers selling the identical goods in the market and thus the demand curve is a horizontal straight line.
When the case of the monopolistic competition is considered, there are many sellers in the market which makes competition and the feature just like the
Concept introduction:
Market: The market is a structure where there are buyers and sellers who sell and the exchange of goods and services between the buyers and sellers exchanges goods and services.
Monopolistic competition: The monopolistic competition is the market structure where there are many sellers selling differentiated commodities and there are few barriers to entry.
Monopoly: The Monopoly is a market structure where there is only one seller selling the commodity. There will be very strong barriers to entry into the market.
Subpart (b):
How monopolistic competition likes a monopoly and a competition.
Subpart (b):
Explanation of Solution
The demand curve of the monopolist is downward sloping and thus, under the monopoly market structure, the monopolist charges a price which is higher than the marginal cost of producing the commodity. Similarly, in the case of the monopolistic competition, the seller faces the downward sloping demand curve and thus, the monopolistically competitive firm also charges a price which is higher than the marginal cost of producing the commodity which is a direct outcome of the monopoly like feature in the monopolistically competitive firm.
In the perfect competition, the firm earns normal or the zero economic profit in the long run because, the profit would attract more entrants into the market which will increase the supply and reduce the price to the normal level. So, just like this feature of the perfect competition, the monopolistically competitive firm also earns zero economic profit in the long run because there are only a few barriers to entry into the market and the profit attracts more players into the monopolistically competitive market which brings down the
Concept introduction:
Market: The market is a structure where there are buyers and sellers who sell and the exchange of goods and services between the buyers and sellers exchanges goods and services.
Monopolistic competition: The monopolistic competition is the market structure where there are many sellers selling differentiated commodities and there are few barriers to entry.
Monopoly: The Monopoly is a market structure where there is only one seller selling the commodity. There will be very strong barriers to entry into the market.
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Chapter 17 Solutions
Modern Principles: Microeconomics
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- A decrease in money demand causes the real interest rate to _____ and output to _____ in the short run, before prices adjust to restore equilibrium. Group of answer choices rise; rise fall; fall fall; rise rise; fallarrow_forwardIf a country's policy makers were to continously use expansionary monetary policy in an attempt to hold unemployment below the natural rate , the long urn result would be? Group of answer choices a decrease in the unemployment rate an increase in the level of output All of these an increase in the rate of inflationarrow_forwardA shift in the Aggregate Supply curve to the right will result in a move to a point that is southwest of where the economy is currently at. Group of answer choices True Falsearrow_forward
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