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A Monopolistic Competitor Has Fixed Costs of $100 and a

Question 44

Essay

A monopolistic competitor has fixed costs of $100 and a
constant $1 marginal cost of production.
A) Will this firm earn short­run monopoly profits if it produces
and sells 300 units at a price of $2.00 each?
B) What can we expect to happen to this monopolistic
competitor in the long run?

Correct Answer:

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A) Yes; its total revenue is $600 ($2 × ...

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