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Exam 16: Monopolistic Competition

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Question 31

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Table 16-7 A monopolistically competitive firm faces the following demand schedule for its product. In addition, the firm has total fixed costs equal to 20. -Refer to Table 16-7. If the firm has a constant marginal cost of $7 per unit, how much profit will the firm earn at the profit-maximizing level of output?

A) $24
B) $25
C) $41
D) $66

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

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Question 32

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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) panel a
B) panel b
C) panel c
D) panel d

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

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Question 33

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To maximize its profit, a monopolistically competitive firm chooses its level of output by looking for the level of output at which

In a monopolistically competitive market,

Monopolistically competitive markets may be socially inefficient because

Figure 16-6 -Refer to Figure 16-6. Which of the graphs shown would be consistent with a profit maximizing firm in a monopolistically competitive market that is earning a positive profit?

A firm can earn economic profits in the short run

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?

Table 16-1 The following table shows the percentage of output supplied by the top eight firms in four different industries. -Refer to Table 16-1. Which industry is the most competitive?

Considering perfect competition, monopolistic competition, and monopoly, which of the market structures features entry in the long run?

Table 16-2 The following table shows the total output produced by the top six firms as well as the total industry output for each industry. -Refer to Table 16-2. Which industry has the highest concentration ratio?

Scenario 16-7 Consider the problem facing two firms, YumYum and Bertollini, in the frozen food market. Each firm has just come up with an idea for a new "frozen meal for two" which it would sell for $9. Assume that the marginal cost for each new product is a constant $2, and the only fixed cost is for advertising. Each company knows that if it spends $12 million on advertising it will get 1.5 million consumers to try its new product. YumYum has done market research which suggests that its product does not have any "staying" power in the market. Even though it could get 1.5 million consumers to buy the product once, it is unlikely that they will continue to buy the product in the future. Bertollini's market research suggests that its product is very good, and consumers who try the product will continue to be consumers over the ensuing year. On the basis of its market research, Bertollini estimates that its initial 1.5 million customers will buy one unit of the product each month in the coming year, for a total of 18 million units. -Refer to Scenario 16-7. Which of the following is most likely?

Scenario 16-7 Consider the problem facing two firms, YumYum and Bertollini, in the frozen food market. Each firm has just come up with an idea for a new "frozen meal for two" which it would sell for $9. Assume that the marginal cost for each new product is a constant $2, and the only fixed cost is for advertising. Each company knows that if it spends $12 million on advertising it will get 1.5 million consumers to try its new product. YumYum has done market research which suggests that its product does not have any "staying" power in the market. Even though it could get 1.5 million consumers to buy the product once, it is unlikely that they will continue to buy the product in the future. Bertollini's market research suggests that its product is very good, and consumers who try the product will continue to be consumers over the ensuing year. On the basis of its market research, Bertollini estimates that its initial 1.5 million customers will buy one unit of the product each month in the coming year, for a total of 18 million units. -Refer to Scenario 16-7. If Bertollini decides to advertise its product it can expect to

Which of the following is an example of a monopolistically competitive industry?

Which of the following conditions is characteristic of a monopolistically competitive firm in both the short-run and the long run?

In which of the following market structures does free entry and exit play an important role in the long-run equilibrium outcome?

A monopolistically competitive market is like both a competitive market and a monopoly in that firms in all three market structures

Figure 16-11 -Refer to Figure 16-11. The graph depicts a monopolistically competitive firm in the short run. Which of the following explanations best describes the long run adjustment?

The lower the concentration ratio, the

Figure 16-11 -Refer to Figure 16-11. If this firm profit-maximizes, how much revenue will it earn?