Exam 14: Monopolistic Competition

The figure shows the demand curve for Nike shoes (D), and Nike's marginal revenue curve (MR), marginal cost curve (MC), and average total cost curve (ATC). -In the figure above, Nike's economic profit is ________.

In the short run, for a firm in monopolistic competition,

Monopolistic competition is a market in which ________ firms produce ________ goods and services.

In the long run, a monopolistically competitive firm ________ make an economic profit and a monopoly ________ make an economic profit.

The key feature of monopolistic competition that distinguishes it from perfect competition is

In the long run, a firm in monopolistic competition has its price equal to ________ and also has its price ________.

-The above figure represents Tony's Pizza Parlor, a firm in monopolistic competition. a) What quantity will be produced? b) What price will be charged? c) What is Tony's total cost? d) What is Tony's total revenue? e) What is Tony's economic profit or loss? f) Is this a long-run equilibrium? Why or why not?

In monopolistic competition, firms sell a differentiated product. In perfect competition, firms sell an identical product. How do these markets differ as a result?

Shower Power, Inc., a firm in monopolistic competition, produces shower radios. The company's economists know that it if it does not advertise, it can sell no radios at $80, and for each $10 cut in price, the quantity of radios it can sell increases by 50 a day. This relationship continues to hold until the price falls to $20. The firm's total fixed cost is $3,000 a day. Its marginal cost is constant at $20 per radio. Shower Power's economists have determined that if the firm spends $3,500 a day on advertising, it can double the quantity of radios sold at each price. a) Draw the new demand curve faced by the firm and its new marginal revenue curve. Also draw Shower Power's marginal cost and average total cost curves. b) If Shower Power does not advertise, what quantity of radios sold maximizes its profit? What is the profit-maximizing price? What is the firm's economic profit? c) If Shower Power does advertise, what quantity of radios sold maximizes its profit? What is the profit-maximizing price? What is the maximum economic profit that the firm can make on its shower radios? Draw a diagram to show the effects of advertising. d) Will Shower Power advertise? Why or why not?

Which of the following firms are in a monopolistically competitive market?

Firms in monopolistic competition maximize their profit by setting their price equal to their marginal revenue.

In monopolistic competition in the long run, firms ________.

Which characteristic is associated with monopolistic competition?

Firms in monopolistic competition can make an economic profit in the long run.

In the long run, monopolistically competitive firms produce where

Which of the following is part of the market structure for monopolistic competition?

A textbook publisher is in monopolistic competition. If the firm spends nothing on advertising, it can sell no books at $100 a book, but for each $10 cut in price, the quantity of books it can sell increases by 20 books a day. The firm's total fixed cost is $2,400 a day. Its average variable cost and marginal cost is a constant $20 per book. If the firm spends $1,200 a day on advertising, it can increase the quantity of books sold at each price by 50 percent. If the firm advertises, its maximum economic profit is

In the long run, a firm in monopolistic competition will

Suppose that at one of the Talbot's shops, marginal cost of a coat is constant at $150, and total fixed cost is $3,000 a day. The shop maximizes its profit by selling 15 coats a day at $500 per coat. Then the shops nearby increase their advertising. The Talbot shop responds by spending $1,500 a day more on advertising its coats. As a result, its profit-maximizing number of coats sold increases to 25 a day at $400 per coat. -In the scenario above, as a result of increased advertising, Talbot's markup:

One important difference between monopoly and monopolistic competition is the