Exam 13: Monopolistic Competition: the Competitive Model in a More Realistic Setting

A monopolistically competitive firm is producing an output level where marginal revenue is greater than marginal cost. What should this firm do to increase its profit or reduce its losses?

Suppose that if a local McDonald's restaurant reduces the price of a Big Mac from $4.00 to $3.25, the number of Big Macs it sells per day will increase from 4 to 5. Explain the output effect and the price effect resulting from this change. Using a graph, illustrate both the loss in revenue from selling each of the first 4 Big Macs for $0.75 less and the additional revenue from selling 1 more Big Mac. What is the total change in revenue received which results from this price decrease?

What is the trade-off that consumers face when buying the product of a monopolistically competitive firm?

Figure 13-13 -Refer to Figure 13-13. What is the profit maximizing output level?

A monopolistically competitive firm that earns economic profits in the short run will be able to expand its market share even if the market size remains constant.

Assuming that the total market size remains constant, a monopolistically competitive firm earning profits in the short run will find the demand for its product decreasing in the long run because

Figure 13-15 -Refer to Figure 13-15 to answer the following questions. a. What is the profit-maximizing output level? b. What is the profit-maximizing price? c. What is the average total cost at the profit-maximizing output level? d. What area represents the firm's profit? e. At which output level are economies of scale exhausted? f. Does this graph most likely represent the long run or the short run? Why?

Advertising is the action of a firm that is intended to maintain the differentiation of its product over time.

The entry and exit of firms in a monopolistically competitive market guarantee that

Is a monopolistically competitive firm productively efficient?

In the long run, if the demand curve of a profit-maximizing monopolistically competitive firm is tangent to its average total cost curve then

Which of the following is true of trademarks?

The demand curve of a monopolistically competitive firm

Figure 13-17 -Refer to Figure 13-17. Suppose the firm is currently producing Q_f units. What happens if it increases its output to Q_g units?

Table 13-4 Table 13-4 lists estimated revenues and costs (per week) for plastic vials (100 vials per box) for the Victoria Biological Supplies Company. Victoria sells plastic vials to universities and private research laboratories. -Refer to Table 13-4. Based on the data in the table, which of the following statements is true?

Which of the following is true of a typical firm in a monopolistically competitive industry?

Unlike a perfectly competitive firm, for a monopolistically competitive firm

Which of the following is the best example of a firm that competes in a monopolistically competitive market?

Table 13-1 -Refer to Table 13-1. What is the marginal revenue of the 3rd unit?

New firms are able to enter monopolistically competitive markets because there are low barriers to entry.