Exam 9: Firms in Perfectly Competitive Markets

Assume that price exceeds average variable cost over the relevant range of demand.If a monopolistically competitive firm is producing at an output where marginal revenue is $111.11 and marginal cost is $118,then to maximise profits the firm should increase its output.

Table 9-2 Eco Energy is a monopolistically competitive producer of a sports beverage called Power On. Table 9-2 shows the firm's demand and cost schedules. -Refer to Table 9-2.What is the output (Q)that maximises profit,and what is the price (P)charged?

There are many cattle ranchers in the world,and there are also many McDonald's restaurants in the world.Why,then,does a McDonald's restaurant face a downward-sloping demand curve while a cattle rancher faces a horizontal demand curve?

Which of the following is important in determining the extent of competition in an industry?

Table 9-1 -Refer to Table 9-1.The table shows

One reason why the coffeehouse market is competitive is that

Figure 9-17 -Refer to Figure 9-17.What is the allocatively efficient output for the firm represented in the diagram?

An oligopolist differs from a perfect competitor in that

An agreement among firms to charge the same price or otherwise not to compete is called

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?

Table 9-8 Firm A (Alistair's) and Firm B (Baine's) are the only firms selling luggage in the upscale city of Adelaide. Each firm must decide on whether to increase its advertising spending to compete for customers. If one firm increases its advertising budget but the other does not, then the firm with the higher advertising budget will increase its profit. Table 9-8 shows the payoff matrix for this advertising game. -Refer to Table 9-8.Does Baine have a dominant strategy and,if so,what is it?

A form of implicit collusion where one firm in an oligopoly announces a price change which is matched by other firms in the same industry is

Figure 9-8 Figure 9-8 shows cost and demand curves for a monopolistically competitive producer of iced tea. -Refer to Figure 9-8.At the profit-maximising output level,the firm will

When a monopolistically competitive firm cuts its price to increase its sales,it experiences a loss in revenue due to the income effect and a gain in revenue due to the substitution effect.

Figure 9-14 -Refer to Figure 9-14.If the diagram represents a typical firm in the market,what is likely to happen in the long run?

Figure 9-18 -Refer to Figure 9-18.The diagram demonstrates that

Collusion makes firms better off because if they act as a single entity (a cartel),they can reduce output and increase their prices and profits.But some cartels have failed and others are unstable.Which of the following is a reason why cartels often break down?

The most important barrier to entry is economies of scale.

Figure 9-14 -Refer to Figure 9-14.What is the profit-maximising output level?

What is the profit-maximising rule for a monopolistically competitive firm?