Exam 11: Monopolistic Competition and Oligopoly

Often the best way for a firm to convey information to consumers about the quality of a product is to spend money on creating well-known brand names and the provision of guarantees.

The following table shows the payoff matrix of the two firms (Firm X and Firm Y) in dollars when they advertise and when they do not advertise. Table 11.1 -According to Table 11.1,if firm X advertises and Y does not advertise:

As a firm in a monopolistically competitive market successfully differentiates its products and earns a positive economic profit,it is soon imitated by its rivals and profit of the firm falls to zero.

A monopolistically competitive firm faces a relatively less elastic demand curve than a monopolist.

The market structure called monopolistic competition is named using both monopoly and perfect competition.Why?

Martin is in the market for a new television set.He is deciding between two sets: one is rather expensive but offers a guarantee; the other has a lower price but offers no guarantee.Martin's decision to buy the more expensive set would indicate that:

A monopolistically competitive market is characterized by:

The figure given below shows revenue and cost curves of a monopolistically competitive firm. Figure: 11.1 In the figure, MR: Marginal revenue curve ATC: Average total cost curve AVC: Average variable cost curve MC: Marginal cost curve -Consider the monopolistically competitive firm described in the Figure 11.1.The profit-maximizing output level and price are,respectively:

Oligopolies can arise as a result of both natural barriers and governmentally created barriers.

According to Figure 11.1,the profit-maximizing firm is making an average:

A monopolistically competitive firm maximizes profit at the point at which price is equal to marginal cost.

One reason that monopolistically competitive firms often use celebrity endorsements is that:

Firms develop brand names in order to make the demand for their product more elastic.

Both monopolistically and perfectly competitive firms earn only normal profits in the long run.

In the context of market structure,the characteristic that best describes a monopolistically competitive market is that:

A deadweight loss arises in a perfectly competitive market as each firm is a price taker.

By forming a cartel the member firms can actually raise their profits.

Which of the following is an example of cartel?

The figure below shows the revenue and cost curves of a monopolistically competitive firm. Figure: 11.2 In the figure, D: Demand curve MR: Marginal revenue curve ATC₁ and ATC₂: Average total cost curves MC: Marginal cost curve -In Figure 11.2,if the market is monopolistically competitive,which quantity represents long-run equilibrium for the firm?

Compared with generic products,a brand name: