Exam 15: Monopolistic Competition and Product Differentiation

Use the following to answer questions: Figure: Monopolistic Competition II -(Figure: Monopolistic Competition II) Which panel(s) in the figure Monopolistic Competition II show(s) a monopolistic competitor producing where price is greater than marginal revenue?

Since a monopolistically competitive firm has the same long-run profits as a perfectly competitive firm, both types of industries are efficient.

Since a monopolistically competitive firm faces a downward-sloping demand curve, its price will be _____ revenue.

Use the following to answer questions: Figure: Profit Maximization in Monopolistic Competition -(Figure: Profit Maximization in Monopolistic Competition) Look at the figure Profit Maximization in Monopolistic Competition. If other firms see economic profits in the industry, they will enter it, and the demand curve for firms already in the industry will shift to the _____; in the long run, this will result in an economic profit _____ and a price _____.

Shops that sell live bait to people in Alabama may be monopolistically competitive if there is product differentiation and differentiation by location.

Because most communities have a large number of similar but not identical substitutes, the market for chiropractors is best considered to be:

Advertising is more likely to occur in perfect competition than in monopolistic competition.

Use the following to answer questions: Scenario: Monopolistically Competitive Firm For a monopolistically competitive firm, Q = 160 - P; MC = 20 + 2Q; and TC = 20Q + Q² + 20. -(Scenario: Monopolistically Competitive Firm) Given the information in the scenario Monopolistically Competitive Firm, what is the profit-maximizing level of output for this firm in the short run?

Use the following to answer questions: Figure: Monopolistic Competitor -(Figure: Monopolistic Competitor) If the firm shown in the figure Monopolistic Competitor produces at its profit-maximizing level, it will produce:

General Snacks is a typical firm in monopolistic competition. If the market is in long-run equilibrium, then the price General Snacks charges for its snack goods:

Product differentiation under monopolistic competition means that each firm:

A monopolistically competitive industry has some of the characteristics of perfect competition, including:

A university town has many clothing retailers. Some of the stores sell sweatshirts and T-shirts to college students, and other stores sell suits, sport coats, and business casual wear to college professors. How are these retail stores differentiating the products that they sell?

If the toothpaste market is monopolistically competitive, product differentiation may take the form of:

Use the following to answer questions: Figure: The Market for Gas Stations -(Figure: The Market for Gas Stations) The figure The Market for Gas Stations shows curves facing a typical gas station in a large town. The market is characterized by many firms, differentiated products, easy entry, and easy exit. If the gas station here is typical, then in the long run, we would expect to observe:

The price for a firm under monopolistic competition is _____ revenue.

Which of the following scenarios is likely to provide the LEAST amount of economic usefulness?

Only irrational consumers are affected by advertising.

Only firms with some market power will gain from individually advertising their product.

A gas station operates in a monopolistically competitive market and is in short-run equilibrium. Suppose that a fixed cost for this firm decreases. As a result, the firm's price will _____, the firm's output will _____, and the firm's economic profit will _____.