Exam 10: Monopolistic Competition

In the long run,firms in both monopolistically competitive markets and perfectly competitive markets earn zero economic profits,but unlike perfectly competitive firms in the long run,monopolistically competitive firms

The table below shows the demand and cost data facing 'Velvet Touches,' a monopolistically competitive producer of velvet throw pillows. Use the data to answer the following questions. a.Complete the Total Revenue (TR),Marginal Revenue (MR)and Marginal Cost (MC)columns above. b.What are the profit-maximising price and quantity for Velvet Touches? c.Is the firm making a profit or a loss? How much is the profit or loss? Show your work. d.Is this firm operating in the long run or in the short run? Explain your answer. e.If the firm's profit or loss is typical of all firms in the market for throw pillows,what is likely to happen in the future? Will there be more firms or will some existing firms leave the industry? Explain your answer. f.What will happen to the typical firm's profit or loss after all entry/exit adjustments?

A monopolistically competitive firm chooses

Figure 10-17 -Refer to Figure 10-17.What is the productively efficient output for the firm represented in the diagram?

Figure 10-14 -Refer to Figure 10-14.What is the profit-maximising output level?

After selling 1000 three-ring binders,Tony DiFulvio realises that the marginal revenue from selling the last binder was less than the marginal cost.From this we can conclude that

Figure 10-8 Figure 10-8 shows cost and demand curves for a monopolistically competitive producer of iced tea. -Refer to Figure 10-8.At the profit-maximising output level,the firm will

Which of the following statements is true about monopolistically competitive firms?

The demand curve of a monopolistically competitive firm

In both monopolistically competitive and perfectly competitive industries,

If a firm faces a downward-sloping demand curve,

Figure 10-15 Figure 10-15 illustrates a monopolistically competitive firm. -Refer to Figure 10-15.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?

Explain the similarities and differences between the long-run equilibrium for a perfectly competitive firm and a monopolistically competitive firm.Illustrate your answer with a graph demonstrating the long-run equilibrium for the two types of firms.