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

You have just opened a new Italian restaurant in your hometown where there are three other Italian restaurants. Your restaurant is doing a brisk business and you attribute your success to your distinctive northern Italian cuisine using locally grown organic produce. What is likely to happen to your business in the long run?

After selling 1,000 three-ring binders, Tony DiFulvio realizes that the marginal revenue from selling the last binder was less than the marginal cost. From this we can conclude that

Economists have long debated whether there is a significant loss of well-being to society in markets that are monopolistically competitive rather than perfectly competitive. Which of the following offers the best reason why some economists believe that monopolistically competitive markets are less efficient than perfectly competitive markets?

Advertising is the action of a firm that is intended to maintain the differentiation of its product over time.

Figure 13-8 Figure 13-8 shows cost and demand curves for a monopolistically competitive producer of iced-tea. -Refer to Figure 13-8. What is the profit-maximizing output level?

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-maximizing 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?

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

Figure 13-4 Figure 13-4 shows short-run cost and demand curves for a monopolistically competitive firm in the market for designer watches. -Refer to Figure 13-4. What is the area that represents the total fixed cost of production?

Figure 13-6 -A monopolistically competitive industry that earns economic profits in the short run will

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

Figure 13-13 -Refer to Figure 13-13. Economies of scale are exhausted at which output level?

Arturo runs a Taco Bell franchise. He is selling 250 Gordita Supremes per week at a price of $2.75. If he lowers the price to $2.70, he will sell 251 Gordita Supremes. What is the marginal revenue of the 251st Gordita Supreme? If selling the extra Gordita Supreme adds $0.20 to Arturo's costs, what will be the effect on his profit from selling 251 Gordita Supremes instead of 250?

If a monopolistically competitive firm breaks even, the firm

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?

Complete the following table.

The key characteristics of a monopolistically competitive market structure include

Unlike a perfectly competitive firm, a monopolistic competitor does not have a short-run shutdown point.

If a typical monopolistically competitive firm is making short-run losses, then

Explain the differences between total revenue, average revenue, and marginal revenue.

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?