1. "Competition in quality and in service may be just as effective as price competition in giving buyers more for their money." Do you agree? Why?
2.Explain why monopolistically competitive firms frequently prefer nonprice to price competition.
3.What purpose does product differentiation serve from a firm's perspective?
4.What purpose does product differentiation serve from society's perspective?
Two point questions:
5. a) Explain how the entry of firms into its industry affects the demand curve facing a monopolistic competitor, and
b) how that, in turn, affects its economic profit.
6.Suppose that a monopolistically competitive restaurant is currently serving 300 meals per day (the output where MR = MC). At that output level, ATC per meal is $13, AVC is $10, and consumers are willing to pay $12 per meal. What is the size of this firm's profit or loss? Will there be entry or exit? Will this restaurant's demand curve shift left or right as a result of the entry or exit?