1. What happens to the demand curve in monopolistic competition in the long run?
2. What happens to profits in monopolistic competition?
3. What can a company do to avoid demand squeeze?
4. What do firms try to do with their products in monopolistic competition?
5. What benefits do customers enjoy when a market moves from perfect competition to monopolistic competition?
1. What happens to the demand curve in monopolistic competition in the long run?
ReplyDeleteThe demand curve flattens.
2. What happens to profits in monopolistic competition?
Profits are maximized by producing the quantity at which MR=MC.
3. What can a COMPANY do to avoid demand squeeze?
A company can raise prices.
4. What do firms try to do with their products in monopolistic competition?
Firms in a monopolistically competitive market tend to differentiate their products.
5. What benefits do customers enjoy when a MARKET moves from perfect competition to monopolistic competition?
Customers enjoy getting more quantity for the same price, because firms under a monopolistic competition are more profitable operating with excess capacity, meaning that they could increase the quantity produced and lower the ATC of production.
I had wrong answers to these two questions. Answers After the correction:
ReplyDelete3. What can a COMPANY do to avoid demand squeeze?
A company can keep innovating new products so it can create a new demand curve that is steep.
5. What benefits do customers enjoy when a MARKET moves from perfect competition to monopolistic competition?
Customers enjoy getting a variety of choices of different products.