Question

a monopolistic competitor producing an information product will set the products price using marginal cost a. true b. false in the long run, a monopolistic competitor producing an information product will set price a. greater than average total cost. b. equal to average total cost. c. equal to average variable cost. d. equal to marginal revenue.

Explanation:

First Question (True/False)

In monopolistic competition, firms (including those producing information products) maximize profit by setting \( MR = MC \) (marginal revenue equals marginal cost), not using marginal cost alone to set price. So the statement is false.

In the long run, monopolistic competitors (including for information products) earn zero economic profit. This occurs when price (\( P \)) equals average total cost (\( ATC \)), as new firms enter (or exit) until \( P = ATC \), eliminating economic profit. Option A would imply positive economic profit (attracting new firms), C is for short - run shutdown considerations, and D is the profit - maximizing output condition (not price - setting in long - run equilibrium for zero profit).

Answer:

B. False

Second Question (Multiple Choice)