Question

Answer the question based on the demand and cost schedules for a monopolistically competitive firm given in the table below.

Price	Quantity Demanded	Total Cost	Output
$10.50	1	$10	1
10.00	2	20	2
9.50	3	29	3
9.00	4	36	4
8.50	5	40	5
8.00	6	42	6

Suppose that entry into this industry changes this firm's demand schedule from columns (1) and (3) to columns (2) and (3). We can conclude that this industry is

Multiple Choice

• a pure monopoly.

• purely competitive.

• a constant cost industry.

• monopolistically competitive.

Answer 1

Entry to the industry will mean that the industry is a monopolistically comptitive industry.

It cannot be a pure monopoly since entry is restricted and not possible.

It cannot be a purely competitive market since although entry is free, price should be homogeneous ( firm is a price taker)which is determined ( in the industry ) by market forces of demand and supply ( industry is a price maker)

It cannot be a constant cost industry as total cost is not rising at a constant rate.

It

It