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

Some factors that allow firms to make economic profits are beyond its control. All but one of the following is an uncontrollable factor. Which factor is controllable?

If a monopolistically competitive firm lowers its price and, as a result, its total revenue decreases, then

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 what way does long-run equilibrium under monopolistic competition differ from long-run equilibrium under perfect competition?

Compared to a perfectly competitive firm, the demand curve facing a monopolistically competitive firm is

A monopolistically competitive firm chooses

Which of the following is not a characteristic of long-run equilibrium in a monopolistically competitive market?

A monopolistically competitive industry that earns economic profits in the short run will face a more elastic demand curve in the long run.

When a credit card company offers different services with its card, like travel insurance for air travel tickets purchased with the credit card or product insurance for items purchased with the card, the credit card company is trying to

-Refer to Table 10-3. If this firm continues to produce, what is likely to happen to the product's price in the long run?

When a monopolistically competitive firm cuts its price to increase its sales, it experiences a loss in revenue due to the

Which of the following statements is true?

A monopolistically competitive firm should lower its price if its marginal revenue exceeds its marginal cost.

A monopolistically competitive firm earning profits in the short run will find the demand for its product decreasing and becoming more elastic in the long run as new firms move into the industry until

A monopolistically competitive firm maximises profit in the short run by producing where

If firms in a monopolistically competitive industry are making profits in the short run,

If a perfectly competitive firm maximises short-run profits, its marginal revenue will be positive and less than its price.

Which of the following is true for a monopolistically competitive firm in long-run equilibrium?

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

-Refer to Figure 10-12. What is the allocatively efficient output for the firm represented in the diagram?