Exam 14: Monopolistic Competition

A textbook publisher is in monopolistic competition. The firm 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 average variable cost and marginal cost is a constant $20 per book. What is the publisher's profit-maximizing price?

Small pizza parlors exist in just about every town. Anyone can open a pizza parlor, and the pizzas from one parlor typically have different tastes and sizes than pizzas from another parlor. Thus, the pizza industry is an example of

Excess capacity refers to any unsold output due to insufficient demand.

Agave, Six Feet Under, Globe, Silk, Sotto Sotto and Zocalo are all restaurants in Atlanta. In the long run, Globe could I. make a positive economic profit. II) make zero economic profit. III) incur an economic loss.

-In the above figure of a monopolistically competitive firm, the area of economic profit is

A firm in ________ will engage in ________ to try to earn an economic profit.

A firm in monopolistic competition can determine what price to charge for its product because of

Agave, Six Feet Under, Globe, Silk, Sotto Sotto and Zocalo are all restaurants in Atlanta. Suppose at the profit maximizing quantity, Zocalo charges $22 for each dinner entrée, and its ATC is equal to $24. What should Zocalo do?

Brand name drugs are chemically identical to their generic counterparts. Yet, consumers often prefer the brand name product to the generic product. Making consumers think that a brand name drug differs from its generic counterpart is an example of

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

Firms in monopolistic competition charge prices that are ________ those of the other firms in the market.

La Super Rica is a taco stand in Santa Barbara, California. It is popular with the locals and even the late Julia Child found the food delicious. If La Super Rica is currently producing where marginal revenue is greater than marginal cost, to increase its profit La Super Rica should

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 average total cost:

In monopolistically competitive markets, products are ________ and there ________ barriers to entry.

A firm's markup is the amount by which ________ exceeds ________.

In monopolistic competition, in the long run firms have

Agave, Six Feet Under, Globe, Silk, Sotto Sotto and Zocalo are all restaurants in Atlanta. In this monopolistic market, economic profit would encourage ________, which decreases the ________ for each firm's meals.

The Karaoke Channel Online streams professional-grade karaoke for $9.95 a month. Suppose Karaoke Channel Online has a constant marginal cost of $1 per customer and total fixed cost is $20,000. The profit maximizing number of customers is 10,000. Several competitors start to advertise online. Karaoke Channel Online now spends $5,000 a month on advertising and the profit maximizing number of customers increases to 12,000. What is Karaoke Channel Online's average total cost before the advertising begins?

How does a firm in monopolistic competition determine its price and quantity? What type of profit can it make in the short run and the long run?

In the short run, a firm in monopolistic competition produces where P = MC.