Managerial Economics > QUESTIONS & ANSWERS > MANAGERIAL ECONOMICS EXAM | DOWNLOAD FOR QUALITY GRADES (All)

MANAGERIAL ECONOMICS EXAM | DOWNLOAD FOR QUALITY GRADES

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1. Why is the firm’s demand curve flatter than the total market demand curve in monopolistic competition? Ans: If we talk about monopolistic competition, the slope of firm’s demand curve and ma... rket demand curve depend upon elasticity. The elasticity of firm’s demand curve is more than market demand curve, because it is easier for consumers to switch to another product than to switch to a product from another market. 2. Suppose a monopolistically competitive firm is making a profit in the short run. What will happen to its demand curve in the long run? Ans: When monopolistic competitive firm is making profit in short run, then if a new firm enters in long run the demand curve and marginal revenue curve of the firm will shift left. The profit will go down to zero. 3. Suppose a firm can practice perfect first-degree price discrimination. What is the lowest price it will charge, and what will its total output be? Ans: According to the given scenario, if each unit is sold at reserved price, marginal revenue will be price of each unit sold, So the demand curve is the firm’s marginal revenue curve. The firm output will be perfectly competitive where the marginal cost curve intersects the demand curve MR=MC. 4. Why is there no market supply curve under conditions of monopoly? Ans: In a monopolistic market, the output depend on marginal cost and demand curve. A shift in demand changes the price and output. That is why there is no relation between price and supply. So, there is no supply curve in monopoly. 5. Why do firms enter an industry when they know that in the long run economic profit will be zero? Ans: Firms want to earn profit when they enter industry as there is no cost of entering, no matter if the profit earning time is short. If under any situation the [Show More]

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