Consider an incumbent firm in a monopolistically competitive market (a) Describe the two key attributes

Question

Consider an incumbent firm in a monopolistically competitive market.

(a) Describe the two key attributes

of a monopolistically competitive market in the short run.

(b) Describe one further attribute of a monopolistically competitive market that holds in the long run.

(c) With reference to a diagram, compare and contrast an incumbent firm’s situation in short run with its situation in the long run. (Hint: describe how and why an incumbent firm’s demand curve evolves over time.)

(d) Assuming that the average cost curve is U-shaped, discuss the question of long-run efficiency in a monopolistically competitive market.

Economics