Excess capacity is problem in monopolistic competition

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Reference no: EM131379143

Excess capacity is a problem in monopolistic competition because if there were fewer firms in the industry:

A. there would be less need for government regulation.

B. average total costs would be higher and profits would be lower.

C. average total costs would be lower and the prices paid by consumers could be lower.

D. there would be more choices for consumers.

2. The model of monopolistic competition characterizes a city's market for plumbing services. Suppose that the market is initially in long-run equilibrium, and then demand for plumbing services increases. In the short run, plumbing services' price will _____ and output will _____.

A. not change; not change

B. rise; rise

C. rise; fall

D. fall; fall

Reference no: EM131379143

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