8. How can a monopolistic competitor tell whether the price it is charging will cause the firm to earn profits

or experience losses?

9. If the firms in a monopolistically competitive market are earning economic profits or losses in the short

run, would you expect them to continue doing so in the long run? Why?

10. Is a monopolistically competitive firm productively efficient? Is it allocatively efficient? Why or why not?

11. Will the firms in an oligopoly act more like a monopoly or more like competitors? Briefly explain.

12. Does each individual in a prisoner’s dilemma benefit more from cooperation or from pursuing self-

interest? Explain briefly.

13. What stops oligopolists from acting together as a monopolist and earning the highest possible level of

profits?

Critical Thinking Questions

14. Aside from advertising, how can monopolistically competitive firms increase demand for their products?
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