Willmonopolistfirmcontinueto produce in the short run if a loss is incurred at the best short run level of output?

1

(a)

If the monopolist firm incurs loss in the short run, it will stop production in the long run.

Explain why the demand curve facing a firm under monopolistic competition is negatively sloped?

3

(a)

What is the reason for the long run equilibrium of a firm in monopolistic competition to be associated with zero profit?

3

(a)

What is the value of MR when the demand curve is elastic?

3

(a)

List the three different ways in which oligopoly firms may behave.

3

(a)

What is meant by prices being rigid? How can oligopoly behaviour lead to such an outcome?

3

(a)

The market demand curve for a commodity and the total cost for a monopoly firm producing the commodity is given by the schedules below. Use information to calculate the following:

Quantity	0	1	2	3	4	5	6	7	8
Price	52	44	37	31	26	22	19	16	13

Quantity	0	1	2	3	4	5	6	7	8
Total cost	10	60	90	100	102	105	109	115	125

(i) The MR and MC schedules
(ii) The quantities for which the MR and MC are equal
(iii) The equilibrium quantity of output and the equilibrium price of the commodity.
(iv) The total revenue, total cost and total profit in equilibrium.

6

(a)