Excess capacity is problem in monopolistic competition

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Reference no: EM131385515

1. 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. Consider a two-firm oligopoly facing a market inverse demand curve of P = 100 – 2(q1 + q2), where q1 is the output of Firm 1 and q2is the output of Firm 2. Firm 1's marginal cost is constant at $12, while Firm 2's marginal cost is constant at $20. In Cournot equilibrium, how much output does each firm produce?

A) q1=16, q2=12

B) q1=18; q2=8

C) q1=14 ; q2=11;

D) q1=20; q2=14

Reference no: EM131385515

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