Exam 10: Monopolistic Competition: The Competitive Model in a More Realistic

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?

In the long-run equilibrium, both the perfectly competitive firm and the monopolistically competitive firm produce the output at which MR = MC and charge a price equal to the average total cost of production.

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

A monopolistically competitive market is described as one in which there are

In the long run, what happens to the demand curve facing a monopolistically competitive firm that is earning short-run profits?

Figure 10.12 -Refer to Figure 10.12.The firm represented in the diagram

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. __________________________________________________________________________________________________________________________________________________________________________________________

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

Figure 10.16 -Refer to Figure 10.16 to answer the following questions. a.What is the profit-maximising output level? b.What is the profit-maximising price? c.What is the average total cost at the profit-maximising output level? d.What area represents the firm's profit? e.At which output level are economies of scale exhausted? f.Does this graph most likely represent the long run or the short run? Why? __________________________________________________________________________________________________________________________________________________________________________________________

Figure 10.17 -Refer to Figure 10.17.Suppose the firm is currently producing Q_f units.What happens if it increases its output to Q_g units?

Table 10.3 Table 10.3 shows the demand and cost schedules for a monopolistically competitive firm. -Refer to Table 10.3.The profit-maximising/loss-minimising output level and price are

In long-run equilibrium, compared to a perfectly competitive market, a monopolistically competitive industry produces a ________ level of output and charges a ________ price.

Unlike a perfectly competitive firm, for a monopolistically competitive firm

The marginal revenue of a monopolistically competitive firm

What is the difference between the terms 'marketing' and 'advertising'? __________________________________________________________________________________________________________________________________________________________________________________________

If a firm can produce a product at a lower average cost than its competitors, it stands a better chance of earning economic profit.

In monopolistic competition, if a firm produces a highly desirable product relative to its competitors, the firm will be able to raise its price without losing any customers.

One of your classmates asserts that advertising, marketing research, and brand management are redundant expenditures because a firm can obtain the same information by simply looking at what customers are already buying.Which of the following is not a response you might offer her?

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.

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. __________________________________________________________________________________________________________________________________________________________________________________________