ECON 200 SFU Monopolistic Competition Question

ECON 200 D
Final Exam – Page 10 of 12
3/8/2023
5. (15 points) Answer the following questions about imperfect/monopolistic competition.
Your answers can be brief.
(a) (3 points) What rule(s) will a monopolistically competitive firm follow when choosing its output
(b) (3 points) Is the price in monopolistic competition higher than, lower than, or equal
to the efficient price? Why?
(c) (3 points) If the firm is making a positive profit, what will happen to the demand
curve that the firm is facing?
ECON 200 D
Final Exam – Page 11 of 12
3/8/2023
(d) (3 points) Why might firms choose not to shut down if they are making negative
profits?
(e) (3 points) Explain why we would say that a monopolistically competitive firm in
the long run equilibrium is not productivity efficient. What would have to happen
to this firm/in this market for there to be productive efficiency?

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