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

In the long-run equilibrium, a monopolistically competitive firm earning normal profit produces the allocatively efficient output level.

A monopolistically competitive firm earning profits in the short run will find the demand for its product decreasing and becoming more elastic in the long run as new firms move into the industry until

Discuss the role of product differentiation and advertising in monopolistic competition.

A monopolistically competitive firm that earns economic profits in the short run will face a more elastic demand curve in the long run.

Table 13-1 -Refer to Table 13-1. What portion of the marginal revenue of the 4th unit is due to the output effect and what portion is due to the price effect?

Assume that price exceeds average variable cost over the relevant range of demand. If a monopolistically competitive firm is producing at an output where marginal revenue is $111.11 and marginal cost is $118, then to maximize profits the firm should increase its output.

Which of the following characterizes the market that Panera Bread competes in?

To maximize their profits and defend those profits from competitors, monopolistically competitive firms must

Figure 13-8 Figure 13-8 shows cost and demand curves for a monopolistically competitive producer of iced tea. -Refer to Figure 13-8. What is the firm's profit-maximizing price?

Which of the following statements is true about marginal revenue?

Figure 13-4 Figure 13-4 shows short-run cost and demand curves for a monopolistically competitive firm in the market for designer watches. -Refer to Figure 13-4. What is the area that represents the total variable cost of production?

Some factors that allow firms to make economic profits are beyond its control. All but one of the following is an uncontrollable factor. Which factor is controllable?

Table 13-3 Table 13-3 shows the demand and cost schedules for a monopolistically competitive firm. -Refer to Table 13-3. What is the amount of the firm's loss at its optimal output level?

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Both monopolistically competitive firms and perfectly competitive firms maximize profits

If a monopolistically competitive firm breaks even, the firm

Which of the following characteristics is common to monopolistic competition and perfect competition?

Figure 13-11 -Refer to Figure 13-11. What is the amount of excess capacity?

Both the perfectly competitive firm and the monopolistically competitive firm produce at the output where marginal revenue equals marginal cost (MR = MC) but only the perfectly competitive firm achieves allocative efficiency. Explain why this is the case.

A trademark is