This topic contains a solution. Click here to go to the answer

Author Question: The industry for personal care products in Richland is monopolistically competitive in nature. The ... (Read 39 times)

piesebel

  • Hero Member
  • *****
  • Posts: 565
The industry for personal care products in Richland is monopolistically competitive in nature. The firms in this industry earn positive economic profits in the short run.
 
  Do the firms continue to earn positive profits in the long run? Explain your answer.

Question 2

Which of the following statements is true?
 
  A) Rational economic agents maximize more than just monetary income.
  B) An individual does not require information to make optimal decisions.
  C) The principle of optimization is only accurate when it comes to making monetary decisions.
  D) It is not necessary to consider the risks of a particular alternative while making an optimal decision.



Related Topics

Need homework help now?

Ask unlimited questions for free

Ask a Question
Marked as best answer by a Subject Expert

huda

  • Sr. Member
  • ****
  • Posts: 304
Answer to Question 1

If firms in a monopolistically competitive market earn positive economic profits, new firms enter the industry in the long run. As new firms enter the industry, the demand curves faced by the existing firms become flatter. This is because demand for a good becomes more elastic when there are more substitutes. The demand curve faced by existing firms also shifts to the left because market demand is now split between more firms. As a result, the firms optimize at a lower quantity and charge a lower price for their respective products. This in turn reduces the profits earned by the firms in the industry. The entry of new firms continues until the existing firms earn zero economic profits.

Answer to Question 2

A





 

Did you know?

Giardia is one of the most common intestinal parasites worldwide, and infects up to 20% of the world population, mostly in poorer countries with inadequate sanitation. Infections are most common in children, though chronic Giardia is more common in adults.

Did you know?

Pope Sylvester II tried to introduce Arabic numbers into Europe between the years 999 and 1003, but their use did not catch on for a few more centuries, and Roman numerals continued to be the primary number system.

Did you know?

The effects of organophosphate poisoning are referred to by using the abbreviations “SLUD” or “SLUDGE,” It stands for: salivation, lacrimation, urination, defecation, GI upset, and emesis.

Did you know?

The eye muscles are the most active muscles in the whole body. The external muscles that move the eyes are the strongest muscles in the human body for the job they have to do. They are 100 times more powerful than they need to be.

Did you know?

Nearly all drugs pass into human breast milk. How often a drug is taken influences the amount of drug that will pass into the milk. Medications taken 30 to 60 minutes before breastfeeding are likely to be at peak blood levels when the baby is nursing.

For a complete list of videos, visit our video library