Monopolistic Competition- Short Run and Long Run- Micro 4.4

The video tutorial by Mr. Clifford introduces the concept of monopolistic competition, highlighting its similarities and differences with monopoly and perfect competition. It explains that firms in monopolistic competition are price makers with differentiated products, leading to no economic profit in the long run due to low entry barriers. The tutorial covers the short run, where firms can make a profit, and the transition to the long run, where increased competition leads to a decrease in demand and no economic profit.

What characteristic of monopolistic competition allows firms to have some control over their pricing?

• Horizontal demand curve

• High barriers to entry

• Differentiated products

• Identical products

In the short run, why can monopolistically competitive firms earn profits?

• They have no competition

• They have differentiated products

• They are price takers

• They have a horizontal demand curve

What happens to the demand curve of a monopolistically competitive firm in the long run?

• It becomes vertical

• It shifts to the left

• It becomes horizontal

• It shifts to the right

In the long run, what is the economic profit for firms in monopolistic competition?

• Positive profit

• Zero economic profit

• Infinite profit

• Negative profit

What causes the demand curve to shift in the long run for monopolistically competitive firms?

• Government intervention

• Decrease in product differentiation

• Entry of new firms

• Increase in production costs