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Exam 13: Monopolistic Competition: the Competitive Model in a

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Question 91

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Figure 13-18 -Refer to Figure 13-18.The diagram demonstrates that

A) in the short run, the monopolistic competitor produces an output Qb but in the long run after it adjusts its capacity, it will produce the allocatively efficient output, Qₐ.
B) it is not possible for a monopolistic competitor to produce the productively efficient output level, Qₐ, because of product differentiation.
C) it is possible for a monopolistic competitor to produce the productively efficient output level, Qₐ, if it is willing to lower its price from Pb to Pₐ.
D) in the long run, the monopolistic competitor produces the minimum-cost output level, Qₐ, but in the short run its output of Qb is not cost minimizing.

E) A) and B)
F) B) and C)

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Question 92

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What is the most important difference between perfectly competitive markets and monopolistically competitive markets?

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In both perfectly competitive and monopo...

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Question 93

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Assume 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 $23 and marginal cost is $19, then to maximize profits the firm should

Figure 13-11 -Refer to Figure 13-11.What is the allocatively efficient output for the firm represented in the diagram?

If a firm can produce a product at a lower average cost than its competitors, it stands a better chance of earning an economic profit.

Brand management refers to

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

Explain the significance of brand management to a firm that has differentiated its product.Comment specifically on the importance of obtaining a trademark.

If buyers of a monopolistically competitive product feel the products of different sellers are strongly differentiated, then the demand for each seller's product is

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 fixed cost of production?

Discuss the role of product differentiation and advertising in monopolistic competition.

In the highly competitive fast-food restaurant market, brand name restaurants have a strong profit incentive to maintain high sanitary conditions and avoid any negative consequences.

Figure 13-11 -Refer to Figure 13-11.What is the productively efficient output for the firm represented in the diagram?

In San Francisco there are many restaurants that specialize in a wide variety of cuisines.Patronage at these restaurants is influenced by factors such as tastes, price, and location.This market is

Figure 13-17 -Refer to Figure 13-17.What is the productively efficient output for the firm represented in the diagram?

Figure 13-12 Figure 13-12 shows short-run cost and demand curves for a monopolistically competitive firm in the market for designer watches. -Refer to Figure 13-12.If the diagram represents a typical firm in the designer watch market, what is likely to happen in the long run?

What is meant by "excess capacity"? How does it relate to consumer utility?

Does the fact that monopolistically competitive firms do not achieve productive efficiency or allocative efficiency mean that there is a significant loss in consumer welfare?

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?

What are the key factors that determine the profitability of a firm in a monopolistically competitive market?