Exam 14: Monopolistic Competition and Product Differentiation

Use the following to answer questions Figure: Firms in Monopolistic Competition -(Figure: Firms in Monopolistic Competition) In panel (B) of the figure Firms in Monopolistic Competition, the profit-maximizing quantity of output is determined by the intersection at point:

Use the following to answer questions Figure: The Market for Gas Stations -(Figure: The Market for Gas Stations) The figure The Market for Gas Stations shows curves facing a typical gas station in a large town. The market is characterized by many firms, differentiated products, easy entry, and easy exit. If the gas station here is typical, prices charged by firms in the market are likely to:

Use the following to answer question Figure: Possible Long-Run Outcome -(Figure: Possible Long-Run Outcome) In the figure Possible Long-Run Outcome, which price and quantity refer to a potential long-run profit maximizing outcome for a firm producing in a monopolistically competitive market?

Use the following to answer questions Figure: The Market for Gas Stations -(Figure: The Market for Gas Stations) Look at the figure The Market for Gas Stations. Assume that the market for gas stations is characterized by many firms, differentiated products, easy entry, and easy exit. The typical gas station will maximize profits at a quantity of:

In monopolistic competition:

Use the following to answer question Figure: Monopolistic Competition -(Figure: Monopolistic Competition) The firm in the figure Monopolistic Competition is producing at the output level that maximizes profits (minimizes losses). The shaded rectangle depicts the level of:

Because of the lack of substitutes, the market for newly developed brand-name prescription drugs is best considered to be:

Use the following to answer questions Figure: Firms in Monopolistic Competition -(Figure: Firms in Monopolistic Competition) In panel (C) of the figure Firms in Monopolistic Competition, economic loss per unit is:

Monopolistic competition describes an industry characterized by:

A(n) _____ is a single firm with _____, whereas a(n) _____ implies an industry with _____ firm(s) and _____.

General Snacks is a typical firm in a market characterized by the model of monopolistic competition. Initially, the market is initially in long-run equilibrium, and then there is an increase in the market demand for snacks. We expect that:

In the short run, a monopolistically competitive firm produces at the optimal level of output and is earning positive economic profits. In the long run, the _____ of firms shifts the firm's demand and marginal revenue curves _____ the firm's level of output and _____ the price it can charge until price equals average total cost.

Use the following to answer questions Figure: Profits in Monopolistic Competition -(Figure: Profits in Monopolistic Competition) Look at the figure Profits in Monopolistic Competition. A zero economic profit is earned if the profit-maximizing price is _____ in panel _____.

In the long run, monopolistically competitive firms:

The price for a firm under monopolistic competition is _____ revenue.

The model of monopolistic competition characterizes the market for plumbing services in a city. Suppose that the market is in long-run equilibrium. For a typical plumbing firm, price:

If a monopolistically competitive firm is in long-run equilibrium, price:

An industry with a single firm producing a product for which there are no close substitutes and which is protected by barriers to entry is an example of:

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 restaurant market. For the restaurant shown here, the profit per unit is:

The market for grade A large eggs in California is best considered to be an example of: