Please answer these five questions: 1) Agree or disagree and exp...

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Please answer these five questions:

1) Agree or disagree and explain your answer. "The typical firm in a monopolistic competitive market earns above normal profits because it sells a differentiated product and only produces up to the point where marginal revenue equals marginal cost."

2a) Suppose that a restaurant offering Ethiopian cuisine opened in Cambridge Ma. and became a great success. What would you predict would happen in the greater Boston restaurant market?
2b) Draw a graph illustrating the likely changes in the shape and position of the demand curve facing the original “Ethiopian” restaurant in the above problem.

4) Why do prices in monopolistic competitive markets remain above the prices that would exist in perfectly competitive markets even in the long run after entry has eliminated above normal profits?

5) Agree or disagree with the following statement and either explain your answer or draw a diagram to illustrate your answer. "The more highly differentiated the output of individual producers in a monopolistic competitive market, the higher the % markup of Price over marginal cost."

6) Give an actual example from your experience or observation of price discrimination.

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Any firm in monopolistic competitive market structure, firms would maximize profits when they produce at a point where their marginal costs is equal to its marginal revenue. It is their differentiation from other produces that allow them to earn super normal or above normal profits. However in the long run, their differentiation could be copied by other firms which might decrease the...

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