Question 1

Explain the similarities and differences between the long-run equilibrium for a perfectly competitive firm and a monopolistically competitive firm. Illustrate your answer with a graph demonstrating the long run equilibrium for the two types of firms.

Accepted Answer

<img  loading="lazy" src="/assets/images/blured-textbook.svg" class="d-inline m-1" alt="blured image" width="139" height="30"> Refer to the graph above. For both type...

Question 2

Table 13-2
  Eco Energy is a monopolistically competitive producer of a sports beverage called Power On. Table 13-2 shows the firm's demand and cost schedules.
-Refer to Table 13-2. What is the marginal profit from producing and selling the 5th case?

Accepted Answer

A)   $275
B)   $145
C)   $35
D)   $20E) B) and C)
F) B) and D)

Question 3

The financial situation at Starbucks in the late 2000s illustrates the fact that maintaining long-run profits in a monopolistically competitive market is

Accepted Answer

A)   impossible.
B)   very difficult.
C)   fairly easy.
D)   almost always guaranteed.E) All of the above
F) A) and B)

Question 4

A monopolistically competitive firm chooses

Accepted Answer

A)   both the quantity of output to produce and the price at which it will sell its output.
B)   the price of the product it sells, but market forces determine the quantity it will be able to sell.
C)   the quantity of output to produce, but the price of the product it sells is determined collectively by all firms in the industry.
D)   the price of the product it sells, but the quantity of output to produce is agreed upon by all firms in the industry.E) A) and B)
F) A) and D)

Question 5

The marketing of the first ballpoint by Milton Reynolds showed

Accepted Answer

A)   that first-mover advantages can make it more difficult for new firms to enter a market and compete against the first mover.
B)   that being the first firm to market a new product can result in a natural monopoly.
C)   that being the first firm to market a product may not lead to a long-lived advantage over later entrants into the market.
D)   how important it is to receive patent protection for a new product.E) B) and D)
F) B) and C)

Question 6

Figure 13-4  Figure 13-4 shows short-run cost and demand curves for a monopolistically competitive firm in the market for designer watches.
-Refer to Figure 13-4. What is the area that represents the total revenue made by the firm?

Accepted Answer

A)   0P0aQa
B)   0P1bQa
C)   0P2cQa
D)   0P3dQaE) A) and D)
F) A) and C)

Question 7

Table 13-4
  Table 13-4 lists estimated revenues and costs (per week)  for plastic vials (100 vials per box)  for the Victoria Biological Supplies Company. Victoria sells plastic vials to university and private research laboratories.
-Refer to Table 13-4. Based on the data in the table, which of the following statements is true?

Accepted Answer

A)   The table summarizes Victoria's short-run, rather than long-run, market for plastic vials.
B)   Victoria could be either a monopolistically competitive or a perfectly competitive firm.
C)   Victoria should shut down temporarily.
D)   Victoria should advertise more in order to increase the demand for plastic vials.E) B) and C)
F) None of the above

Question 8

Figure 13-13 
-Refer to Figure 13-13. What is the output price?

Accepted Answer

A)   P4
B)   P3
C)   P2
D)   P1E) All of the above
F) A) and B)

Question 9

Why do most firms in monopolistic competition typically make zero profit in the long run?

Accepted Answer

A)   because firms produce differentiated products
B)   because the lack of entry barriers would compete away profits
C)   because firms do not produce at their minimum efficient scale
D)   because the total market is not large enough to accommodate so many firmsE) B) and D)
F) A) and C)

Question 10

What effect does the entry of new firms in a monopolistically competitive market have on the economic profits of existing firms in the market? How might existing firms attempt to counteract this effect?

Accepted Answer

New firms entering an industry cause the...

Question 11

Figure 13-8  Figure 13-8 shows cost and demand curves for a monopolistically competitive producer of iced-tea.
-Refer to Figure 13-8. At the profit-maximizing output level the firm will

Accepted Answer

A)   earn a profit of $176.
B)   break even.
C)   earn a profit of $88.
D)   earn a profit of $60.E) All of the above
F) B) and D)

Question 12

When a monopolistically competitive firm cuts its price to increase its sales, it experiences a loss in revenue due to the

Accepted Answer

A)   substitution effect.
B)   income effect.
C)   price effect.
D)   output effect.E) None of the above
F) C) and D)

Question 13

Table 13-3
  Table 13-3 shows the demand and cost schedules for a monopolistically competitive firm.
-Refer to Table 13-3. What is its average variable cost of production at its optimal output level?

Accepted Answer

A)   $0 (because its optimal output = 0) 
B)   $15
C)   $14.75
D)   $29E) A) and B)
F) A) and C)

Question 14

Figure 13-4  Figure 13-4 shows short-run cost and demand curves for a monopolistically competitive firm in the market for designer watches.
-Refer to Figure 13-4. Should the firm represented in the diagram continue to stay in business despite its losses?

Accepted Answer

A)   No, it should shut down.
B)   Yes, its total revenue covers its variable cost.
C)   No, it is not able to cover its fixed cost.
D)   Yes, it should increase its revenue by raising its price.E) B) and C)
F) All of the above

Question 15

Table 13-1
 
-Refer to Table 13-1. What is the marginal revenue of the 3rd unit?

Accepted Answer

A)   $6.50
B)   $5.50
C)   $1.83
D)   $0.50E) B) and C)
F) A) and B)

Question 16

In contrast with perfect competition, excess capacity characterizes monopolistic competition. Excess capacity is due to which of the following?

Accepted Answer

A)   Monopolistically competitive firms produce at the minimum point on their average total cost curves.
B)   Monopolistically competitive firms face downward-sloping demand curves. In the long run, firms produce where their demand curves are tangent to their long-run average total cost curves.
C)   Monopolistically competitive firms produce where marginal revenue is equal to marginal cost.
D)   Monopolistically competitive markets have low barriers to entry.E) B) and D)
F) A) and C)

Question 17

How would a marketing campaign directed at single women improve the chances of success at a place like a cigar bar?

Accepted Answer

By marketing to single women, a cigar ba...

Question 18

A monopolistically competitive firm maximizes profit where

Accepted Answer

A)   price = marginal revenue.
B)   price > marginal cost.
C)   marginal revenue > average revenue.
D)   total revenue > marginal cost.E) A) and D)
F) B) and D)

Question 19

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

Accepted Answer

A)   to produce a quantity that maximizes market share
B)   to produce a quantity that maximizes total revenue
C)   to produce a quantity such that marginal revenue equals marginal cost
D)   to produce a quantity such that price equals marginal costE) A) and B)
F) All of the above

Question 20

Figure 13-16 
-Refer to Figure 13-16. Figure 13-16 depicts a monopolistically competitive barber shop. Use the diagram to answer the following questions.
a. Suppose the average variable cost of production is $15 when output equals 110 haircuts and $15.25 when output equals 140 haircuts. If the firm wants to maximize its profit or minimize its losses, how many haircuts will it produce and what price should it charge? Explain your answer.
b. Calculate the firm's profit or loss.
c. What is likely to happen in this industry over time as it moves to its new long-run equilibrium?
d. Suppose the barber shop depicted in the diagram remains in the industry. Is this barber shop likely to produce this same quantity of haircuts as in part (a) in the long run?

Accepted Answer

a. Output = 110, Price = $21 whereby MR=...

Exam 13: Monopolistic Competition: the Competitive Model in a More Realistic Setting

Figure 13-4 Figure 13-4 shows short-run cost and demand curves for a monopolistically competitive firm in the market for designer watches. -Refer to Figure 13-4. Should the firm represented in the diagram continue to stay in business despite its losses?

Correct Answer
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Explain the similarities and differences between the long-run equilibrium for a perfectly competitive firm and a monopolistically competitive firm. Illustrate your answer with a graph demonstrating the long run equilibrium for the two types of firms.

Correct Answer
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Refer to the graph above. For both type...
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Correct Answer
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a. Output = 110, Price = $21 whereby MR=...
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Table 13-1 -Refer to Table 13-1. What is the marginal revenue of the 3rd unit?

Correct Answer
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Table 13-3 Table 13-3 shows the demand and cost schedules for a monopolistically competitive firm. -Refer to Table 13-3. What is its average variable cost of production at its optimal output level?

Correct Answer
verified

The financial situation at Starbucks in the late 2000s illustrates the fact that maintaining long-run profits in a monopolistically competitive market is

Correct Answer
verified

Why do most firms in monopolistic competition typically make zero profit in the long run?

Correct Answer
verified

Correct Answer
verified

In contrast with perfect competition, excess capacity characterizes monopolistic competition. Excess capacity is due to which of the following?

Correct Answer
verified

A monopolistically competitive firm maximizes profit where

Correct Answer
verified

Figure 13-4 Figure 13-4 shows short-run cost and demand curves for a monopolistically competitive firm in the market for designer watches. -Refer to Figure 13-4. What is the area that represents the total revenue made by the firm?

Correct Answer
verified

How would a marketing campaign directed at single women improve the chances of success at a place like a cigar bar?

Correct Answer
verified
By marketing to single women, a cigar ba...
View Answer

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

Correct Answer
verified

A monopolistically competitive firm chooses

Correct Answer
verified

Figure 13-8 Figure 13-8 shows cost and demand curves for a monopolistically competitive producer of iced-tea. -Refer to Figure 13-8. At the profit-maximizing output level the firm will

Correct Answer
verified

The marketing of the first ballpoint by Milton Reynolds showed

Correct Answer
verified

When a monopolistically competitive firm cuts its price to increase its sales, it experiences a loss in revenue due to the

Correct Answer
verified

Figure 13-13 -Refer to Figure 13-13. What is the output price?

Correct Answer
verified

Table 13-2 Eco Energy is a monopolistically competitive producer of a sports beverage called Power On. Table 13-2 shows the firm's demand and cost schedules. -Refer to Table 13-2. What is the marginal profit from producing and selling the 5th case?

Correct Answer
verified

What effect does the entry of new firms in a monopolistically competitive market have on the economic profits of existing firms in the market? How might existing firms attempt to counteract this effect?

Correct Answer
verified
New firms entering an industry cause the...
View Answer

Exam 13: Monopolistic Competition: the Competitive Model in a More Realistic Setting

Figure 13-4 Figure 13-4 shows short-run cost and demand curves for a monopolistically competitive firm in the market for designer watches. -Refer to Figure 13-4. Should the firm represented in the diagram continue to stay in business despite its losses?

Correct AnswerverifiedShow Answer

Explain the similarities and differences between the long-run equilibrium for a perfectly competitive firm and a monopolistically competitive firm. Illustrate your answer with a graph demonstrating the long run equilibrium for the two types of firms.

Correct Answerverified Refer to the graph above. For both type...View AnswerShow Answer

Correct Answerverifieda. Output = 110, Price = $21 whereby MR=...View AnswerShow Answer

Table 13-1 -Refer to Table 13-1. What is the marginal revenue of the 3rd unit?

Correct AnswerverifiedShow Answer

Table 13-3 Table 13-3 shows the demand and cost schedules for a monopolistically competitive firm. -Refer to Table 13-3. What is its average variable cost of production at its optimal output level?

Correct AnswerverifiedShow Answer

The financial situation at Starbucks in the late 2000s illustrates the fact that maintaining long-run profits in a monopolistically competitive market is

Correct AnswerverifiedShow Answer

Why do most firms in monopolistic competition typically make zero profit in the long run?

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

In contrast with perfect competition, excess capacity characterizes monopolistic competition. Excess capacity is due to which of the following?

Correct AnswerverifiedShow Answer

A monopolistically competitive firm maximizes profit where

Correct AnswerverifiedShow Answer

Figure 13-4 Figure 13-4 shows short-run cost and demand curves for a monopolistically competitive firm in the market for designer watches. -Refer to Figure 13-4. What is the area that represents the total revenue made by the firm?

Correct AnswerverifiedShow Answer

How would a marketing campaign directed at single women improve the chances of success at a place like a cigar bar?

Correct AnswerverifiedBy marketing to single women, a cigar ba...View AnswerShow Answer

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

Correct AnswerverifiedShow Answer

A monopolistically competitive firm chooses

Correct AnswerverifiedShow Answer

Figure 13-8 Figure 13-8 shows cost and demand curves for a monopolistically competitive producer of iced-tea. -Refer to Figure 13-8. At the profit-maximizing output level the firm will

Correct AnswerverifiedShow Answer

The marketing of the first ballpoint by Milton Reynolds showed

Correct AnswerverifiedShow Answer

When a monopolistically competitive firm cuts its price to increase its sales, it experiences a loss in revenue due to the

Correct AnswerverifiedShow Answer

Figure 13-13 -Refer to Figure 13-13. What is the output price?

Correct AnswerverifiedShow Answer

Table 13-2 Eco Energy is a monopolistically competitive producer of a sports beverage called Power On. Table 13-2 shows the firm's demand and cost schedules. -Refer to Table 13-2. What is the marginal profit from producing and selling the 5th case?

Correct AnswerverifiedShow Answer

What effect does the entry of new firms in a monopolistically competitive market have on the economic profits of existing firms in the market? How might existing firms attempt to counteract this effect?

Correct AnswerverifiedNew firms entering an industry cause the...View AnswerShow Answer

Correct Answer
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Correct Answer
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Refer to the graph above. For both type...
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a. Output = 110, Price = $21 whereby MR=...
View Answer

Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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By marketing to single women, a cigar ba...
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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New firms entering an industry cause the...
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