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Author Question: The firm in the figure above is in monopolistic competition. The firm has A) no excess capacity. ... (Read 150 times)

rmenurse

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on: Jun 29, 2018
The firm in the figure above is in monopolistic competition. The firm has
 
  A) no excess capacity.
  B) excess capacity of 10 units.
  C) excess capacity of 20 units.
  D) excess capacity of 30 units.

Question 2

A price floor that is less than the equilibrium price leads to a shortage of the good. Is this assertion true or false? Explain your answer.
 
  What will be an ideal response?


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pallen55

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Reply #1 on: Jun 29, 2018
Answer to Question 1

C

Answer to Question 2

The assertion is false. A price floor is the minimum price that can legally be charged. If the price floor is less than the equilibrium price, it has no effect because the equilibrium price is already in compliance with the law. Hence a price floor set below the equilibrium price has no effect. However, a price floor set above the equilibrium price will have an effect and will create a surplus of the good.


rmenurse

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Reply 2 on: Jun 29, 2018
Great answer, keep it coming :)

xiaomengxian

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Reply 3 on: Yesterday
Gracias!

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