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In a monopolistically competitive industry:A. To maximize profits, firms set MR=MC and people would be better off it output was reducedB. A firm maximizes profits when MR=MC yet P>MCC. Output could be increased without an increase in total costD. People would be better off if output was reduced

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In the short run, a monopolistically competitive firm produces at the optimal level of output and is earning positive economic profits. Which of the following describes how the firm will adjust in the long run? A. The entry of new firms shifts the firm's marginal cost and average cost curves downward, decreasing the firm's level of output and the price the firm can charge until price equals average total cost.B.The exit of firms shifts the firm's demand and marginal revenue curves rightward, increasing the firm's level of output and the price the firm can charge until price equals average total cost.C.The entry of new firms shifts the firm's demand and marginal revenue curves leftward, decreasing the firm's level of output and increasing the price the firm can charge until price equals average total cost.D. The entry of new firms shifts the firm's demand and marginal revenue curves leftward, decreasing the firm's level of output and the price the firm can charge until price equals average total cost.

Monopolistic competitors often hire a celebrity spokesperson to advertise their product. One explanation for why such advertising works is that:A. Celebrities encourage other firms to enter the industryB. The fact that the firm is willing to pay the large fees associated with celebrity advertising signals consumers that it is a major company and that it is therefore likely to have a reliable product.C. consumers assume that the celebrity has researched the product and that the claims being made on his or her behalf are true.D.celebrities are better informed about the relative merits of different products than the rest of us.

Suppose a monopolistically competitive firm is producing the profit-maximizing level of output and is earning an economic profit in the short run. Then:A. Marginal revenue equals marginal costB. Price is less than average total costsC. Price is less than marginal costD. Marginal revenue is less than marginal cost

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