Q9 of 13 Page 99

Explain why the demand curve facing a firm under monopolistic competition is negatively sloped.

A monopolistic firm has differentiated products so if its wants to increase its sale it will have to lower the prices.

The products of different monopolistic firms are close substitutes to each other so the demand is elastic. High availability of close substitutes make the demand curve negatively sloped of a firm under monopolistic competition market


More from this chapter

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7

The market demand curve for a commodity and the total cost for a monopoly firm producing the commodity is given by the schedules below. Use the information to calculate the following:



























Quantity



0



1



2



3



4



5



6



7



8



Price



52



44



37



31



26



22



19



16



13





























Quantity



0



1



2



3



4



5



6



7



8



Price



10



60



90



100



102



105



109



115



123



(a) The MR and MC schedules


(b) The quantites for which the MR and MC are equal


(c) The equilibrium quantity of output and the equilibrium price of the commodity


(d) The total revenue, total cost and total profit in equilibrium.

 8

Will the monopolist firm continue to produce in the short run if a loss is incurred at the best short run level of output?

 10

What is the reason for the long run equilibrium of a firm in monopolistic competition to be associated with zero profit?

 11

List the three different ways in which oligopoly firms may behave.