Exam 14: Monopolistic Competition and Product Differentiation

A monopolistically competitive firm is operating in the short run at the optimal level of output and is earning negative economic profits. Which of the following must be TRUE?

Since a monopolistically competitive firm faces a downward-sloping demand curve, its price will be _____ revenue.

Use the following to answer questions Figure: Firms in Monopolistic Competition -(Figure: Firms in Monopolistic Competition) Look at the figure Firms in Monopolistic Competition. Zero economic profit will be earned if the profit-maximizing price is _____ in panel _____.

Use the following to answer questions Figure: Firms in Monopolistic Competition -(Figure: Firms in Monopolistic Competition) Look at the figure Firms in Monopolistic Competition. A long-run equilibrium is illustrated at the profit-maximizing price _____ in panel _____.

Which of the following industries is MOST likely to be monopolistically competitive?

In a monopolistically competitive industry:

Monopolistic competition is different from monopoly because firms:

Suppose Susan owns a business that operates in a market characterized by monopolistic competition. Susan's profit-maximizing price is $12, her profit-maximizing output is 900 units per week, and her profits are $1,800 per week. Susan decides that she needs more profits and therefore raises her price to $15. At the new price of $15:

Monopolistic competition describes an industry characterized by a _____ number of firms producing _____ products with _____ entry.

A common example of monopolistic competition is the market for:

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

An example of monopolistic competition is the _____ industry.

A firm operating in a monopolistically competitive market is producing a quantity at which MC = MR. Profit:

Which of the following is NOT a source of product differentiation?

Use the following to answer questions Figure: The Restaurant Market -(Figure: The Restaurant Market) The figure The Restaurant Market shows curves facing a typical restaurant. Assume that many firms, differentiated products, and easy entry and exit characterize the market. In the long run:

Use the following to answer questions Figure: Profit Maximization for a Firm in Monopolistic Competition -(Figure: Profit Maximization for a Firm in Monopolistic Competition) Look at the figure Profit Maximization for a Firm in Monopolistic Competition. Suppose that an innovation reduces a firm's costs from ATC to ATC. Before the innovation reduced the cost, the firm's maximum economic profit was:

The downward-sloping demand curve for a monopolistically competitive firm:

General Snacks is a typical firm in monopolistic competition. Initially, the market is in long-run equilibrium, and then there is an increase in the market demand for snacks. In the long run, the economic profits of typical firms in the industry will be:

An industry with a large number of relatively small firms producing _____ in a market with easy entry and exit is a(n) _____.

Suppose the dry-cleaning market is monopolistically competitive and economically profitable this year. In the long run, the demand for any one firm's dry-cleaning services will _____ as more firms enter the industry, causing economic profits to _____.