Exam 16: Monopolistic Competition

Table 16-1 The following table shows the percentage of output supplied by the top eight firms in four different industries. -Refer to Table 16-1. Which industry has the highest concentration ratio?

The typical firm in the US economy

If advertising reduces a consumer's price sensitivity between identical goods, it is likely to

Figure 16-11 -Refer to Figure 16-11. If this firm profit-maximizes, how much output will it produce?

Although monopolistically competitive markets offer consumers a wide variety of differentiated products, there may still be insufficient variety if

Figure 16-13 -Refer to Figure 16-13. What is the first step in this industry's adjustment to long run equilibrium?

Economists who argue that advertising enhances market efficiency suggest that celebrity advertising signals inferior product quality.

​An empirical study compared the price of eyeglasses in states that restricted advertising by optometrists with those that did not.The study revealed: ​

Scenario 16-2 Suppose market demand for a product is given by the equation P = 20 - Q. For this market demand curve, marginal revenue is MR = 20 - 2Q. -Refer to Scenario 16-2. If the marginal cost of producing this good is 4, what quantity would a profit-maximizing monopolist produce?

Entry of new firms in monopolistically competitive industries can convey a negative externality on producers because firms lose customers and profits from the entry of new competitors. This externality is called the

The product-variety externality states that entry of a new firm conveys a negative externality on consumers.

Consider a monopolistically competitive firm in a market in long-run equilibrium. This firm is likely earning

Scenario 16-3 Peter operates an ice cream shop in the center of Fairfield. He sells several unusual flavors of organic, homemade ice cream so he has a monopoly over his own ice cream, though he competes with many other firms selling ice cream in Fairfield for the same customers. Peter's demand and cost values for sales per day are given in the table below. (Everyone who purchases Peter's ice cream buys a double scoop cone because it's so delicious.) -Refer to Scenario 16-3. Which of the following statements best describes the long run adjustment in this market?

Figure 16-11 -Refer to Figure 16-11. If this firm profit-maximizes, what price will it charge?

A recent outbreak of hepatitis was linked to a national fast-food restaurant chain. This is an example of a case in which

Monopolistic competition is a type of

Figure 16-13 -Refer to Figure 16-13. Which letter represents the profit-maximizing price?

When a monopolistically competitive firm is in a long-run equilibrium, the values of marginal cost, average total cost, and price are all the same.

Figure 16-8 The lines in the figures below illustrate the potential effect of entry and exit in a monopolistically competitive market on either the demand curve or the marginal cost curve of existing firms. -Refer to Figure 16-8. Which of the diagrams illustrates the impact of some existing firms leaving the market?

Scenario 16-2 Suppose market demand for a product is given by the equation P = 20 - Q. For this market demand curve, marginal revenue is MR = 20 - 2Q. -Refer to Scenario 16-2. If the marginal cost of producing this good is 4, how much total consumer surplus would consumers receive in this market?