Discussion:
Choose one question to answer:
1. Give examples of industries that are monopolistically competitive. Explain the cost and revenue curves which distinguish a monopolistically competitive firm from a competitive firm. If you include a graph(s) the graphs must be explained. If there is marketing differences please explain.
2. What is "monopolistic" about monopolistic competition? What is "competitive" about a monopolistically competitive market? Please explain using revenue and cost curves.
3. Suppose that A Cleaner World invents a new type of laundry detergent that has an ingredient that stops stains from setting into clothes. If the laundry detergent market is monopolistically competitive, explain what will happen to the price of its product in the short run. What will happen in the long run?
4. Can a monopolistically competitive firm producing a good with lots of very close substitutes earn large positive profits in the long run? Explain your answer using revenue and cost curves.