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In monopolistic competition:
a) Firms face a perfectly elastic demand curve
b) All products are homogeneous
c) Firms make normal profits in the long run
d) There are barriers to entry to prevent entry
1. Kuhn - Tucker Conditions Max 2x + 3y s.t. pxX + pyY ≤ M. x ≥ 0, y ≥ 0 2. Max (8 + x)(8 + y) s.t. pxX + pyY ≤ M. x ≥ 0, y ≥ 0 Utility function 3. U(x, y)
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