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

Figure 13-8 Figure 13-8 shows cost and demand curves for a monopolistically competitive producer of iced tea. -Refer to Figure 13-8.Based on the diagram, one can conclude that

If the demand curve for a firm is downward-sloping, its marginal revenue curve

Central Grocery in New Orleans is famous for its muffaletta, a large round sandwich filled with deli meats and topped with a tangy olive salad.Suppose the following table represents cost and revenue data for Central Grocery. Illustrate this data by graphing the demand, MR, MC, and ATC curves.Identify the profit-maximizing price and quantity, and show the area representing the total profit received by Central Grocery.

Assume 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 $23 and marginal cost is $19, then to maximize profits the firm should

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

Which of the following describes the relative positions of the demand curve and the average total cost (ATC)curve of a monopolistically competitive firm that earns a profit in the short run?

If price exceeds average variable cost but is less than average total cost, a firm

A firm cannot control all of the factors that allow it to make economic profits.Which of the following is an example of an uncontrollable factor?

Which of the following would not occur as a result of a monopolistically competitive firm suffering a short-run economic loss?

Figure 13-11 -Refer to Figure 13-11.What is the monopolistic competitor's profit maximizing price?

A franchise is

In the long run, if price is less than average cost

If some monopolistically competitive firms exit their market after suffering short-run losses, the demand curves of remaining firms will shift to the right.

If firms in a monopolistically competitive market are earning economic profits, which of the following scenarios best reflects the change a representative firm experiences as the market adjusts to its long-run equilibrium?

When a monopolistically competitive firm cuts its price to increase its sales, it experiences a loss in revenue due to the income effect and a gain in revenue due to the substitution effect.

The marginal revenue of a monopolistically competitive firm

Economists agree that a monopolistically competitive market structure

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 13-5 -Refer to Figure 13-5.The candy store represented in the diagram is currently selling Qₐ units of candy at a price of Pₐ.Is this candy store maximizing its profit and if it is not, what would you recommend to the firm?

Productive efficiency does not hold for a profit-maximizing, monopolistically competitive firm in the long-run equilibrium because the firm operates along the diseconomies-of-scale region of its average total cost curve.