Asked by Markus Chobotaru on May 10, 2024
Verified
A profit‐maximizing firm in a monopolistically competitive market structure behaves much like a ________ in the short run.
A) perfectly competitive firm
B) monopolistic firm
C) dominant firm
D) Cournot duopolist
Cournot Duopolist
A type of duopoly model in which two firms choose their output levels simultaneously to maximize profit, assuming the competitor's output level is fixed.
Monopolistically Competitive
Describing a market structure in which many firms sell products or services that are similar but not identical, allowing for differentiation and some degree of market power.
Short Run
A period in economics during which at least one factor of production is considered fixed, typically focusing on the immediate effects of economic decisions.
- Understand the characteristics of monopolistic competition and how it differs from perfect competition and monopoly.
- Identify and analyze the profit-maximizing behavior of firms in monopolistically competitive markets in the short run and long run.
Verified Answer
RS
Rojie SenarathMay 17, 2024
Final Answer :
B
Explanation :
In the short run, a monopolistically competitive firm has some degree of market power, similar to a monopolistic firm, allowing it to set prices above marginal cost. Unlike perfectly competitive firms, which are price takers, or dominant and Cournot duopolist firms, which involve strategic interactions with other firms, a monopolistically competitive firm faces a downward-sloping demand curve and can make positive economic profits by setting its price.
Learning Objectives
- Understand the characteristics of monopolistic competition and how it differs from perfect competition and monopoly.
- Identify and analyze the profit-maximizing behavior of firms in monopolistically competitive markets in the short run and long run.