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

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

What is the trade-off that consumers face when buying the product of a monopolistically competitive firm?

What is the profit-maximizing rule for a monopolistically competitive firm?

Figure 13-13 -Refer to Figure 13-13.If the diagram represents a typical firm in the market,what is likely to happen to its average cost of production in the long run?

Figure 13-15 -Refer to Figure 13-15 to answer the following questions. a.What is the profit-maximizing output level? b.What is the profit-maximizing price? c.What is the average total cost at the profit-maximizing output level? d.What area represents the firm's profit? e.At which output level are economies of scale exhausted? f.Does this graph most likely represent the long run or the short run? Why?

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

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

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?

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.

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

How might a monopolistically competitive firm continually earn economic profit greater than zero?

Marketing refers to all the activities necessary for a firm to sell a product to a consumer.

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

The marketing of the first ballpoint by Milton Reynolds showed

Monopolistically competitive firms face a perfectly elastic demand curve.

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

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

A monopolistically competitive firm that is earning profits will,in the long run,experience all of the following except

Firms use two marketing tools to differentiate their products.What are these two tools?

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