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

A monopolistic competitor does not earn profits in the long run unless it can successfully differentiate its product in the minds of its consumers.

In a monopolistically competitive market, a successful new restaurant

For a downward-sloping demand curve, marginal revenue decreases as quantity sold increases.

When new firms are encouraged to enter a monopolistically competitive market

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 revenue made by the firm?

If marginal revenue is negative then the revenue lost from receiving a lower price on all the units that could have been sold at the original price is smaller than the additional revenue from selling one more unit of the good.

Figure 13-7 Figure 13-7 shows short-run cost and demand curves for a monopolistically competitive firm in the footwear market. -Refer to Figure 13-7.Which of the following statements describes the best course of action for the firm depicted in the diagram?

Table 13-3 Table 13-3 shows the demand and cost schedules for a monopolistically competitive firm. -Refer to Table 13-3.If this firm continues to produce, what is likely to happen to the product's price in the long run?

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

Draw a graph that shows the impact on a firm's profit when it increases spending on advertising and the increased advertising has no effect on the demand for a firm's product.

How might a monopolistically competitive firm continually earn economic profit greater than zero?

For allocative efficiency to hold

Excess capacity is a characteristic of monopolistically competitive firms.What does excess capacity mean?

If a monopolistically competitive firm is producing 50 units of output where marginal cost equals marginal revenue, total cost is $1,674 and total revenue is $2,000, its average profit is