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

Suppose a monopolistically competitive firm sells 25 units at a price of $10.Calculate its marginal revenue per unit of output if it sells 5 more units of output when it reduced its price to $9.

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?

When a monopolistically competitive firm breaks even in the long run,this is equivalent to earning a zero accounting profit.

A monopolistically competitive firm can increase its profits beyond the long-run equilibrium break-even level by deliberately lowering its price to force some of its competitors out of the market.

A franchise is

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?

Monopolistic competition is a market structure in which

Figure 13-8 Figure 13-8 illustrates a monopolistically competitive firm. -Refer to Figure 13-8.It is possible to lower the average cost of production by expanding output beyond Q₀ to Q₁.Why wouldn't a firm expand its output to Q₁?

New firms are able to enter monopolistically competitive markets because there are low barriers to entry.

Discuss the role of product differentiation and advertising in monopolistic competition.

One goal a firm tries to achieve when it advertises a product is to

What is meant by "excess capacity"? How does it relate to consumer utility?

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

Tony's Italian Ice is a monopolistically competitive firm.If Tony's earns a profit in the short run,which of the following is most likely to occur?

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

Figure 13-6 -Refer to Figure 13-6.Suppose the above graph represents the relationship between the average total cost of producing notebook computers and the quantity of notebook computers produced by Dell.On a graph,illustrate the demand,MR,MC,and ATC curves which would represent Dell maximizing profits at a quantity of 100,000 per month and identify the area on the graph which represents the profit.

If a monopolistically competitive firm has excess capacity

Figure 13-2 -Refer to Figure 13-2.Suppose Dell finds the relationship between the average total cost of producing notebook computers and the quantity of notebook computers produced is as shown by Figure 13-2.Dell will maximize profits if it produces ________ notebook computers per month.

Table 13-2 Table 13-2 shows the demand and cost data facing a monopolistically competitive producer of canvas bags. -Refer to Table 13-2.What are the firm's profit-maximizing or loss-minimizing price and quantity?