1- Monopolistic competition: Assume firms are identical in terms of their cost structure (e.g., their cost curves are the same).
a) In a monopolistically competitive market, the government applies a specific tax of $1 per unit of output. What happens to the profit of a typical firm in this market? Does the number of firms in the market rise or fall?
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Write My Essay For Meb) What is the effect on prices and the number of firms under monopolistic competition if a government subsidy is introduced that reduces the fixed cost of each firm in the industry?
c) Monopolistic competition is sometimes considered inefficient. Why? Are there any welfare enhancing features? Why do monopolistic firms often have excess capacity?
2- The other day, a progressive policy analyst came on CNN and during the very same interview discussing the U.S. labor market claimed that the minimum wage has a negligible effect on unemployment of the unskilled and also that higher rates of immigration of unskilled laborers has a negligible effect on the wage rate of native born unskilled workers. Do you agree? Are these claims even consistent? How could you validate these claims empirically?
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