Exam 16: Monopolistic Competition

Table 16-3 The following table shows the output produced by each of the top eight firms in four industries as well as the total industry output for those industries. -Refer to Table 16-3. What is the concentration ratio for Industry A?

Two college students, Mary and Maggie, are spending spring break in Florida. Mary buys a cup of coffee each morning at the local Starbucks rather than from one of the local coffee shops. Maggie claims that Mary is irrational because she never purchases Starbucks coffee at home, and Starbucks coffee costs more than the coffee sold by local shops. An economist would most likely explain Mary's behavior by suggesting that

Monopolistically competitive firms, like monopoly firms, maximize their profits by charging a price that exceeds marginal cost.

Figure 16-10 The figure is drawn for a monopolistically-competitive firm. -Refer to Figure 16-10. The firm's maximum profit is

Table 16-6 Beatrice's Birthday Cakes is one bakery among many in the market for birthday cakes. The following table presents cost and revenue data for birthday cakes at Beatrice's. -Refer to Table 16-6. What is the profit­maximizing output for Beatrice's Birthday Cakes?

Figure 16-12 -Refer to Figure 16-12. Compare the price and marginal cost in this market with price and marginal cost if this were a perfectly competitive market.

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

Scenario 16-5 McDonald's restaurants has recently announced intentions to open a new restaurant in Smalltown, Indiana. Assume that the fast-food restaurant market in Smalltown is characterized by monopolistic competition. -Refer to Scenario 16-5. As a result of the new McDonald's, residents of Smalltown are likely to benefit from

Which of the following markets is not likely characterized by a monopolistically competitive market?

A firm has the following cost structure: If this firm is in a typical monopolistically competitive market, in the long run it will likely produce

Figure 16-3 This figure depicts a situation in a monopolistically competitive market. -Refer to Figure 16-3. How much profit will the monopolistically competitive firm earn in this situation?

Under which of the following market structures would consumers likely pay the highest price for a product?

Figure 16-9 The figure is drawn for a monopolistically-competitive firm. -Refer to Figure 16-9. The quantity of output at which the MC and ATC curves cross is the

Entry of new firms in monopolistically competitive industries can convey a negative externality on producers because firms lose customers and profits from the entry of new competitors. This externality is called the

If a firm in a monopolistically competitive market successfully uses advertising to decrease the elasticity of demand for its product, the firm will

A firm operating in a monopolistically competitive market can earn economic profits in

Figure 16-9 The figure is drawn for a monopolistically-competitive firm. -Refer to Figure 16-9. In order to maximize its profit, the firm will choose to produce

Scenario 16-3 Peter operates an ice cream shop in the center of Fairfield. He sells several unusual flavors of organic, homemade ice cream so he has a monopoly over his own ice cream, though he competes with many other firms selling ice cream in Fairfield for the same customers. Peter's demand and cost values for sales per day are given in the table below. (Everyone who purchases Peter's ice cream buys a double scoop cone because it's so delicious.) -Refer to Scenario 16-3. How many double scoop ice cream cones should Peter sell per day to maximize his profit?

Figure 16-4 -Refer to Figure 16-4. What price will the monopolistically competitive firm charge in this market?

Figure 16-10 The figure is drawn for a monopolistically-competitive firm. -Refer to Figure 16-10. If the firm were to produce 154.92 units of output,