Exam 11: Monopolistic Competition

If buyers of a monopolistically competitive product feel the products of different sellers have few differences between them, then the demand for each seller's product will be relatively elastic.

When a credit card company offers different services with its card, like travel insurance for air travel tickets purchased with the credit card or product insurance for items purchased with the card, the credit card company is trying to

How might a monopolistically competitive firm continually earn economic profit greater than zero?

A monopolistically competitive firm earning profits in the short run will find the demand for its product decreasing and becoming more elastic in the long run as new firms move into the industry until

-Refer to Figure 11.1.The marginal revenue from the increase in price from P₀ to P₁ equals

Consumers in monopolistically competitive markets face a tradeoff between paying prices greater than marginal costs and purchasing products that are more closely suited to their tastes.

Economists agree that a monopolistically competitive market structure

Figure 11.4 -Refer to Figure 11.4.The candy store represented in the diagram is currently selling Qₐ units of candy at a price of Pₐ.Is this candy store maximizing its profit and if it is not, what would you recommend to the firm?

Figure 11.11 -Refer to Figure 11.11.Which of the following statements is true?

A trademark is

Which of the following is not a characteristic of long-run equilibrium in a monopolistically competitive market?

Figure 11.3 Figure 11.3 shows short-run cost and demand curves for a monopolistically competitive firm in the market for designer watches. -Refer to Figure 11.3.Should the firm represented in the diagram continue to stay in business despite its losses?

What are the most important differences between perfectly competitive markets and monopolistically competitive markets?

Productive efficiency does not hold for a profit-maximizing, monopolistically competitive firm in the long-run equilibrium because the firm operates along the diseconomies-of-scale region of its average total cost curve.

Figure 11.5 Figure 11.5 shows cost and demand curves for a monopolistically competitive producer of iced-tea. -Refer to Figure 11.5.to answer the following questions. a.What is the profit-maximizing output level? b.What is the profit-maximizing price? c.At the profit-maximizing output level, how much profit will be realized? d.Does this graph most likely represent the long run or the short run? Why?

You have just opened a new Italian restaurant in your hometown where there are three other Italian restaurants.Your restaurant is doing a brisk business and you attribute your success to your distinctive northern Italian cuisine using locally grown organic produce.What is likely to happen to your business in the long run?

Consumers in a monopolistically competitive market do not receive any consumer surplus because the price paid for the product exceeds the marginal cost of production.

Although advertising raises the price of a monopolistic competitor's product, it does confer a benefit to consumers.Which of the following is a benefit to consumers?

Table 11.3 Quantity Price (dollars) Total Revenue (dollars) Total Variable Cost (dollars) Total Cost (dollars) 0 \ 21 \ 0 \ 0 \ 50 1 20 20 16 66 2 19 38 31 81 3 18 54 45 95 4 17 68 59 109 5 16 80 75 125 6 15 90 93 143 7 14 98 112 162 8 13 104 140 190 9 12 108 180 230 10 11 110 230 280 Table 11.3 shows the demand and cost schedules for a monopolistically competitive firm. -Refer to Table 11.3.What is the best course of action for the firm in the short run?

Figure 11.13 -Refer to Figure 11.13.Assume Starbucks is successful with its new health and wellness stores, and as a result it is able to earn economic profits.Which of the graphs in the figure above reflects this?