Exam 15: Monopolistic Competition and Product Differentiation

Suppose the dry-cleaning market is monopolistically competitive and economically profitable this year. In the long run, the demand for any one firm's dry-cleaning services will _____ as more firms enter the industry, causing economic profits to _____.

Use the following to answer questions: Figure: The Market for Gas Stations -(Figure: The Market for Gas Stations) The figure 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 shown here were to raise its price above the profit-maximizing price, the outcome would be _____ in total revenue.

Use the following to answer questions: Figure: The Market for Gas Stations -(Figure: The Market for Gas Stations) Look at the figure The Market for Gas Stations. Assume that the market for gas stations is characterized by many firms, differentiated products, easy entry, and easy exit. For the typical gas station the profit-maximizing price would be:

A monopolistic competitor is likely to advertise to:

Do economists consider advertising to be an economically productive activity? Explain.

In a monopolistically competitive industry:

Use the following to answer questions: Figure: Profits in Monopolistic Competition -(Figure: Profits in Monopolistic Competition) Look at the figure Profits in Monopolistic Competition. A long-run equilibrium is illustrated at the profit-maximizing price _____ in panel _____.

Use the following to answer question: Figure: Monopolistic Competition IV -(Figure: Monopolistic Competition IV) The firm in the figure Monopolistic Competition IV is producing at the output level that maximizes profits (minimizes losses). The shaded rectangle depicts the level of:

The market for grade A large eggs in California is best considered to be an example of:

In long-run equilibrium, monopolistic competitors produce at the minimum point on the average total cost curve.

In the long run, if a monopolistically competitive firm produces the optimal level of output:

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

The price in long-run equilibrium for a monopolistically competitive firm is _____ and output is _____, compared to that of a perfectly competitive firm with an identical production function and cost curves.

Use the following to answer questions: Figure: The Restaurant Market -(Figure: The Restaurant Market) The figure The Restaurant Market shows curves facing a typical restaurant. Assume that many firms, differentiated products, and easy entry and exit characterize the restaurant market. For the restaurant shown here, the profit per unit is:

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, in the short run, this firm:

Use the following to answer questions: Figure: Profit Maximization in Monopolistic Competition -(Figure: Profit Maximization in Monopolistic Competition) In panel (B) of the figure Profit Maximization in Monopolistic Competition, 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:

Monopolistic competition describes an industry characterized by:

Which of the following is NOT a characteristic of monopolistic competition?

The downward-sloping demand curve for a monopolistically competitive firm:

Use the following to answer questions: Figure: Monopolistic Competition III -(Figure: Monopolistic Competition III) The figure Monopolistic Competition III 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. The optimal level of output for Pat's Pizza Parlor is _____ and the profit-maximizing price is _____.