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Exam 16: Monopolistic Competition

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Question 31

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A monopolistically competitive firm has the following cost structure: The firm faces the following demand curve: To maximize profit (or minimize losses) , the firm will produce

A) 20 units.
B) 30 units.
C) 40 units.
D) 50 units.

E) None of the above
F) A) and D)

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Question 32

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A business-stealing externality is

A) an externality that is likely to be punished under antitrust laws.
B) the negative externality that occurs when one firm attempts to duplicate exactly the product of a different firm.
C) an externality that is considered to be an explicit cost of business in monopolistically competitive markets.
D) the negative externality associated with entry of new firms in a monopolistically competitive market.

E) C) and D)
F) All of the above

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Question 33

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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. What is the maximum amount of profit that Peter can earn per day?

The relationship between advertising and product differentiation is

Discuss how brand names may enhance the efficiency of markets in a less developed country.

Figure 16-11 -Refer to Figure 16-11. If this firm profit-maximizes, what price will it charge?

Scenario 16-9 Dean goes to the grocery store to buy chips and soda for a party. He purchases brand name products even though generic versions are available at lower prices. His friend John says he was irrational to spend more for a nearly identical product. His friend Martina agreed with Dean's decision to spend more for the brand name products. -Refer to Scenario 16-9. Which friend is a critic of brand names?

The claim that advertising reduces the elasticity of demand is likely to be made by a defender of advertising.

Figure 16-14 -Refer to Figure 16-14. The deadweight loss from production for this firm is represented by which of the following areas?

Monopolistic competition is the only market structure that features many sellers.

Figure 16-14 -Refer to Figure 16-14. The deadweight loss from production for this firm is represented by which of the following areas?

Figure 16-14 -Refer to Figure 16-14. Use the letters to identify the deadweight loss from this firm producing at its profit- maximizing level of output.

In which of the following market structures can firms earn economic profits in the long run?

Figure 16-5 -Refer to Figure 16-5. Which of the graphs depicts a short-run equilibrium that will encourage the entry of other firms into a monopolistically competitive industry?

A profit-maximizing firm in a monopolistically competitive market charges a price equal to marginal cost.

Consider a monopolistically competitive firm in a market in long-run equilibrium. This firm is likely earning

Table 16-4 This table shows the demand schedule, marginal cost, and average total cost for a monopolistically competitive firm. -Refer to Table 16-4. Which of the following is likely to happen in the long run in this market?

Economists defend brand names as useful to consumers because brand names

Table 16-4 This table shows the demand schedule, marginal cost, and average total cost for a monopolistically competitive firm. -Refer to Table 16-4. What is this firm's profit­maximizing level of output?

Professional organizations (for example, the American Medical Association and the American Bar Association) have been active advocates for regulation to restrict the right of professionals to advertise. Describe what economic incentives might exist for existing professionals to restrict advertising.