Exam 14: Monopolistic Competition

Product innovation and development is efficient if the marginal social cost of a new and improved product ________ its marginal social benefit. In monopolistic competition marginal revenue is less than price, so product innovation is probably ________ to its efficient level.

A firm in a monopolistically competitive market

Because consumers value product variety,

An advantage of monopolistic competition over perfect competition is

In the short-run, the similarity between a monopolist and a monopolistically competitive firm is that

A firm's markup is

Dole Co. operates in a monopolistically competitive market. Which of the following does not characterize Dole Co.'s market?

Use the information below to answer the following questions. Fact 14.3.3 Suppose that Roots' marginal cost of a jacket is a constant $125.00 and the total fixed cost at one of its stores is $1,500 a day. This store sells 20 jackets a day, which is its profit-maximizing number of jackets. Then the stores nearby start to advertise their jackets. The Roots store now spends $2,000 a day advertising its jackets, and its profit-maximizing number of jackets sold jumps to 70 a day. -Refer to Fact 14.3.3. Before the advertising begins, the average total cost of a jacket sold in this store is

Which of the following is always true regarding a profit-maximizing monopolistically competitive firm in short-run equilibrium?

When firms in monopolistic competition make an economic profit,

In long-run equilibrium, a firm in monopolistic competition

Under monopolistic competition, long-run economic profit is zero because of

In monopolistic competition, firms can make an economic profit in

If a firm spends $600 on advertising, its

Product differentiation exists within an industry when

Use the figure below to answer the following questions. Figure 14.2.5 -Refer to Figure 14.2.5. The figure shows the situation facing Smart Digit, Inc., a firm in monopolistic competition that produces calculators. The firm's markup is ________ per calculator.

Use the figure below to answer the following question. Figure 14.2.7 -Refer to Figure 14.2.7. The figure shows the demand, marginal revenue, and cost curves for a monopolistically competitive firm in the long run. The firm has excess capacity of

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 publisher advertises, its profit maximizing level of output is

Use the information below to answer the following questions. Fact 14.2.1 Groceries for the Gourmet Palate No food, it seems, is safe from being repackaged to look like an upscale product. Samuel Adams' $120 Utopias, in a ridiculous copper-covered 24-oz. bottle meant to resemble an old-fashioned brew kettle, is barely beer. It's not carbonated like a Bud, but aged in oak barrels like scotch. It has a vintage year, like a Bordeaux, is light, complex, and free of any alcohol sting, despite having six times as much alcohol content as a regular can of brew. Source: Time, April 14, 2008 -Refer to Fact 14.2.1. Samuel Adams makes the market for beer inefficient if

Use the information below to answer the following questions. Fact 14.3.2 Suppose that Tommy Hilfiger's marginal cost of a jacket is $100 (a constant marginal cost)and at one of the firm's shops, total fixed cost is $2,000 a day. The profit-maximizing number of jackets sold in this shop is 20 a day. Then the shops nearby start to advertise their jackets. The Tommy Hilfiger shop now spends $2,000 a day advertising its jackets, and its profit-maximizing number of jackets sold jumps to 50 a day. -Refer to Fact 14.3.2. Having a brand name helps Tommy Hilfiger increase its economic profit because