Exam 18: Monopolistic Competition

In markets where the government imposes an excise tax on unit sales, it also has a tendency to dabble with restrictions on advertising (e.g. of cigarettes and liquor). Do potential (or actual) restrictions on advertising in these markets serve the interest of a government that is interested in maximising its tax revenue from the sale of these products? Explain your answer.

Economic losses are in a monopolistically competitive markets:

When a firm in a monopolistically competitive market earns zero economic profit, its product price must equal marginal cost.

When a firm operates at efficient scale, it is producing at the maximum point on its average total cost curve.

Why does a typical monopolistically competitive firm face a downward-sloping demand curve?

If brand names are efficient market mechanisms, banning them will lead to less competition and higher prices in the markets brand names from which they are absent.

Because of product differentiation, a firm in a monopolistically competitive market:

As market restrictions begin to be relaxed in China, computer hardware manufacturers have started advertising their products on billboards throughout China. The Premier of China expressed dismay that individual manufacturers had chosen to use advertising, in open disregard of an industry-wide 'gentleman's agreement' not to openly advertise 'technology products'. In the past the Computer Hardware Manufacturers Association informally monitored the agreement. -According to the information provided, as a result of this new advertising strategy, economists would be likely to predict that the Computer Hardware Manufacturers Association will:

Graph 17-4 -Refer to Graph 17-4. Which of the panels shown depicts a firm in a monopolistically competitive market earning economic profits in the short run?

A business-stealing externality is:

Long-run profit earned by a monopolistically competitive firm is driven to the competitive level due to a shift in:

The profit-maximising rule for a firm in a monopolistically competitive market is to select the quantity at which:

Whenever a new firm considers entry into a monopolistically competitive market with a new product, it considers:

Graph 17-1 -Refer to Graph 17-1. If a firm in a monopolistically competitive market was producing the level of output depicted as Q_d in panel d, it would:

If a firm operates at excess capacity then:

Critics of advertising make which of the following claims? (i) advertising is informational rather than psychological (ii) advertising manipulates people's tastes (iii) advertising costs generally exceed labour costs

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

The product-variety externality is associated with:

If firms sell highly differentiated consumer goods, then one significant cost to all such firms is likely to be:

When firms in a monopolistically competitive market are said to experience excess capacity, this fact is: