Exam 15: Monopolistic Competition and Product Differentiation

Which feature is shared by monopolistic competition and perfect competition?

As product differentiation increases,the price elasticity of demand falls and the firm increases its market power.

Which statement is TRUE?

Use the following to answer question: Figure: Monopolistic Competition II -(Figure: Monopolistic Competition II)Use Figure: Monopolistic Competition II.Which panel(s)in the figure show(s)a monopolistic competitor in long-run equilibrium?

The restaurant industry is characterized by excess capacity.This means that:

Short-run equilibrium in monopolistic competition differs from that of monopoly because the monopolistic competitor can make losses in the short run,while in a monopoly,profits will always be zero or positive.

In the long run,monopolistically competitive firms:

Monopolistic competition is unique among the four market structures in that it is the only one that is always characterized by product differentiation.

Use the following to answer question: Figure: Monopolistic Competition III -(Figure: Monopolistic Competition III)Use Figure: Monopolistic Competition III.The figure shows the demand,marginal revenue,marginal cost,and average total cost curves for Pat's Pizza Parlor,a monopolistic competitor in the food-to-go industry.Pat's Pizza Parlor's profit at the profit-maximizing quantity will be:

Use the following to answer question: Figure: Profit Maximization in Monopolistic Competition -(Figure: Profit Maximization in Monopolistic Competition)Use Figure: Profit Maximization in Monopolistic Competition.In panel (B)of the figure,the profit-maximizing price is P₂ and the ATC curve is tangent to the new demand curve.The portion of the ATC that lies to the right of the tangency and continues down to the intersection of MC with ATC indicates:

Use the following to answer question: Figure: Profit Maximization in Monopolistic Competition -(Figure: Profit Maximization in Monopolistic Competition)Use Figure: Profit Maximization in Monopolistic Competition.When the demand curve for a firm in monopolistic competition shifts,the marginal revenue curve:

Use the following to answer question: Figure: Monopolistic Competition V -(Figure: Monopolistic Competition V)Use Figure: Monopolistic Competition V.The figure illustrates a firm in the _____;in the _____,the demand and marginal revenue curves will shift to the _____.

Use the following to answer question: Figure: Firms in Monopolistic Competition -(Figure: Firms in Monopolistic Competition)Use Figure: Firms in Monopolistic Competition.In panel (C)of the figure,the profit-maximizing quantity of output is determined by the intersection at point:

An industry with a large number of relatively small firms producing _____ products in a market with easy entry and exit is a(n)_____.

Many customers will walk right past a diner that serves coffee and go to Starbucks,where they pay more for a cup of java.For these customers,coffee is differentiated by:

In monopolistic competition:

Advertising is an economically productive activity and NOT a waste of resources because it:

A brand name is owned by a particular firm,and it distinguishes that firm's products from those of its competitors.

Use the following to answer question: Figure: Comparing Long-Run Equilibriums -(Figure: Comparing Long-Run Equilibriums)Use Figure: Comparing Long-Run Equilibriums.Which statement is FALSE?

The broccoli market is perfectly competitive.This means that the price of broccoli is _____ than if the market were monopolistically competitive,and total broccoli output in the market is _____ than if it were monopolistically competitive.