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

Sparkle,one of many firms in the market for toothpaste,is in long-run equilibrium.Sparkle has a small market share and has been in business for a long time. a.Identify the market structure in which Sparkle operates.Explain your answer. b.What is Sparkle's profit or loss? Explain your answer.If you cannot determine the profit or loss,explain what information is missing. c.Draw a diagram showing Sparkle's demand curve,marginal revenue curve,average total cost curve,and marginal cost curve.Label your diagram.

Which of the following is true for a firm with a downward-sloping demand curve for its product?

A firm that is first to the market with a new product frequently discovers that there are design flaws or problems with the product that were not anticipated.How do these problems affect the innovating firm?

The table below shows the demand and cost data facing "Velvet Touches," a monopolistically competitive producer of velvet throw pillows. Quantity Price Total Revenue Marginal Revenue Total Cost Marginal Cost 1 \ 30 \ 32 2 28 43 3 26 53 4 24 64 5 22 76 6 20 90 7 18 106 8 16 126 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?

Figure 13-7 shows short-run cost and demand curves for a monopolistically competitive firm in the footwear market. -Refer to Figure 13-7.Which of the following statements describes the best course of action for the firm depicted in the diagram?

Compared to a perfectly competitive firm,the demand curve facing a monopolistically competitive firm is

In contrast with perfect competition,excess capacity characterizes monopolistic competition.Excess capacity is due to which of the following?

A monopolistically competitive firm that is profitable in the short run will face competition that will eventually eliminate the firm's profits in the long run.But the firm can stave off competition and continue to earn economic profits if

Recent research has shown that the first firm to enter a market often does not have a long-term advantage over later entrants into the market.An example that has been used to illustrate this is

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?

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

Juicy Couture has been successful in selling women's clothing using an unusual strategy. According to an article in the Wall Street Journal,the key to the firm's strategy is to "limit distribution to maintain the brand's exclusive cachet,even if that means sacrificing sales,a brand-management technique once used only for high-end luxury brands." In 2006,Juicy clothes were sold in only four department stores: Neiman Marcus,Saks,Bloomingdale's,and Nordstrom.In 2006,its sales have more than quadrupled since 2002. Source: Rachel Dodes,"From Track Suits to Fast Track," Wall Street Journal,September 13,2006. How does limiting the number of stores in which Juicy's products are sold contribute to its success?

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?

Table 13-5 Quantity Price Total Cost 1 \ 18 \ 14 2 16 20 3 14 26 4 12 32 5 10 38 6 8 44 Table 13-5 shows the demand and cost data facing a monopolistically competitive producer of canvas bags. -Refer to Table 13-5.What are the firm's profit-maximizing or loss-minimizing price and quantity?

In the United States,the average person mostly patronizes firms that operate in

Article Summary Several hotel companies have begun catering to pet owners by marketing their pet-friendly policies to pet owners,creating pet-friendly rooms,and offering various hospitality programs and amenities for pet lovers.Klimpton Hotels does not change extra for pets of any size,offers room amenities such as pet beds,food and water bowls,and provide information about pet-friendly attractions in the area.Choice Hotels has over 3,000 pet-friendly locations worldwide and offers travel tips for pet owners.W Hotels accepts pets less than 40 pounds,provides owners with information about local dog parks,and also provides pet beds,food bowls,and ID tags for their 4-legged guests.Travel sites such as TripAdvisor,Expedia,Travelocity,and PetFriendly.net are also joining the trend by helping pet owners identify pet-friendly hotels and offering reviews of various accommodations. -Refer to the Article Summary.By marketing to pet owners,hotel companies like Klimpton,Choice,and W are trying to set themselves apart from competing hotel companies.This is an example of

A monopolistically competitive firm can convince buyers that its product has value by differentiating its product to suit consumers' preferences.

If a significant number of consumers switch from consuming traditional baked goods to consuming vegan baked goods,a vegan bakery will likely find its demand curve shifting to the ________ and its marginal revenue curve shifting to the ________ as more competitors enter the market.

Which of the following statements is true?

Figure 13-17 -Refer to Figure 13-17.Suppose the firm is currently producing Qf units.What happens if it increases its output to Qg units?