FiltersDone

Question type

Essay

Multiple Choice

Short Answer

True False

Matching

Exam 16: Monopolistic Competition

Show Answer

Share

---

All types

Filters

Study FlashcardsPractice ExamLearn

Question 101

True/False

Review LaterAdd Note

Review Later

Product differentiation always leads to some measure of market power.

Correct Answer

verified

Show Answer

Question 102

True/False

Review LaterAdd Note

Review Later

In a monopolistically competitive market, the number of firms adjusts until economic profits are driven to zero.

Correct Answer

verified

Show Answer

Question 103

Short Answer

Review LaterAdd Note

For the economy as a whole, about what percentage of total firm revenue is spent on advertising?

Figure 16-9 ​ ​ -Refer to Figure 16-9. If this firm profit-maximizes, how much cost will it incur?

When a profit-maximizing firm in a monopolistically competitive market is in long-run equilibrium, marginal cost must lie below average total cost.

When a monopolistically competitive firm raises its price,

A markup of price over marginal cost is inconsistent with free entry and zero profit.

Table 16-5 A monopolistically competitive firm faces the following demand schedule for its product. In addition, the firm has total fixed costs equal to 20. $\begin{array} { | l | l | } \hline \text { Price } & \text { Quantity } \\\hline \$ 30 & 1 \\\hline \$ 26 & 2 \\\hline \$ 22 & 3 \\\hline \$ 18 & 4 \\\hline \$ 14 & 5 \\\hline \$ 10 & 6 \\\hline \$ 6 & 7 \\\hline\end{array}$ -Refer to Table 16-5. If this firm profit maximizes and faces a constant marginal cost of $7, does it have excess capacity? How do you know?

When an industry has many firms, the industry is

Figure 16-9 ​ ​ -Refer to Figure 16-9. If this firm profit-maximizes, how much output will it produce?

In a long-run equilibrium,

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

Figure 16-6 The figure is drawn for a monopolistically competitive firm. ​ -Refer to Figure 16-6. If the firm were to produce 154.92 units of output,

Monopolistic competition is characterized by many buyers and sellers, product differentiation, and barriers to entry.

Describe the shape of the monopolistically competitive firm's demand curve.

In a monopolistically competitive market, the demand curves faced by incumbent firms are unaffected by the entry of new firms into the market.

Table 16-5 A monopolistically competitive firm faces the following demand schedule for its product. In addition, the firm has total fixed costs equal to 20. $\begin{array} { | l | l | } \hline \text { Price } & \text { Quantity } \\\hline \$ 30 & 1 \\\hline \$ 26 & 2 \\\hline \$ 22 & 3 \\\hline \$ 18 & 4 \\\hline \$ 14 & 5 \\\hline \$ 10 & 6 \\\hline \$ 6 & 7 \\\hline\end{array}$ -Refer to Table 16-5. When this firm profit maximizes and faces a constant marginal cost of $7, what is the amount of its markup over marginal cost?

Advertising during the Super Bowl is an example of information about quality contained primarily in the existence and expense of the advertising.

One thing that both critics of advertising and defenders of advertising agree on is that advertising fosters competition.

What is meant by the term "excess capacity" as it relates to monopolistically competitive firms?