Answers+to+chap17

1. c. downsloping like monopoly 2. Two differences are 1) excess capacity: free entry makes competitive firms produce at the minimum of average total cost, at the efficient scale, however, monopolistic product at where marginal cost equals marginal revenue. This enables monopolistic to increase the quantity it produces and lower the average total cost. 2)markup over the marginal cost: since monopolistic allows free entry, so earns zero profit, this means price equals average total cost, but price does not equal marginal cost. Price is above the marginal cost.

3. What are the pros and cons of advertisement? Good point about advertisement is that advertisements encourage competition and lower the prices. Critique of it is that sometimes advertisement companies exaggerate their product and instill false impression about the product.