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

Figure 13-6 -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. Fill in the columns for TR, MR, MC, ATC, and profit. If Central Grocery wants to maximize profits, what price should it charge for a muffaletta, what quantity should it sell, and what will be the amount of its total profit?

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

Suppose Jason owns a small pastry shop. Jason wants to maximize his profit, and thinking back to the college microeconomics class he took in college, he decides he needs to produce a quantity of pastries which will minimize his average total cost. Will Jason's strategy necessarily maximize profits for his pastry shop?

Figure 13-6 -In the long run, if price is less than average cost,

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.

A monopolistically competitive firm that earns an accounting profit in the short run

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

Is a monopolistically competitive firm productively efficient?

Which of the following is not a characteristic of monopolistic competition?

A major difference between monopolistic competition and perfect competition is

Which of the following characteristics is common to monopolistic competition and perfect competition?

Figure 13-19 -Refer to Figure 13-19 to answer the following questions. a. What is the productively efficient output? b. What is the allocatively efficient output? c. What is the amount of excess capacity? d. Suppose the firm is currently producing 14 units. What happens if it increases output to 17 units?

Consumers benefit from monopolistic competition by

Explain the significance of brand management to a firm that has differentiated its product. Comment specifically on the importance of obtaining a trademark.

Assume that 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 $111.11 and marginal cost is $118, then to maximize profits the firm should increase its output.

Figure 13-17 -Refer to Figure 13-17. What is the productively efficient output for the firm represented in the diagram?

One of the assumptions of monopolistic competition is that firms produce differentiated products. What does this assumption imply about the demand curve facing a representative firm?

The economic analysis of monopolistic competition shows that market forces eliminate profits in the long run. However, it is possible for a firm to continue to earn economic profits if the firm

Figure 13-14 Figure 13-14 illustrates a monopolistically competitive firm. -Refer to Figure 13-14. 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?

A profit-maximizing monopolistically competitive firm produces and sells an allocatively efficient quantity of output.