Posted: August 5th, 2022

Why do barriers to entry create market power?

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Answer the following questions 120 words each.
Q-1- Why do barriers to entry create market power?
Q-2- What are the characteristics of monopolistic competition?
Q-3-Explain the relationship between average fixed cost and marginal cost.
Q-4-Can you think of an example of a good whose demand could be perfectly inelastic?
Q-5-Your boss, the mayor of a city, thought that she’d come up with a great way to raise city revenue: increase the tax on gasoline in the city! However, she discovered that the city was actually receiving less tax revenue after the gas tax increase than before. Incensed, she declared that the economic policy prescription of taxing goods with inelastic demand must be flawed. Comment.
Q-6-Draw the demand curve for a good whose price elasticity of demand is equal to zero. Be sure to label both axes. Explain what the graph represents.
Q-7-Gloria works for a museum in a large city with many other museums. Her boss proposes that the museum should raise the price of admission to increase revenues. Gloria was a good student in her economics principles course. How should she advise her boss?
Q-8-Can a firm’s accounting profit be smaller than the economic profit? Assume that all costs are positive
Q-9 What are the characteristics of oligopoly? List some disadvantages
Q-10 How does a monopolist’s marginal revenue change as output increases? Why?

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