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Exam 16: Monopolistic Competition

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Question 191

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Figure 16-13 -Refer to Figure 16-13. Use the letters to identify the area of total revenue for this firm.

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Question 192

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The fact that monopolistically competitive firms charge a price that exceeds marginal cost is responsible for the

A) business-stealing externality that is observed in monopolistically competitive markets.
B) product-variety externality that is observed in monopolistically competitive markets.
C) inefficiencies of the long-term losses earned by monopolistically competitive firms.
D) persistence of positive profits into the long run for monopolistically competitive firms.

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

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Question 193

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A monopolistically competitive firm

If "too much choice" is a problem for consumers, it would occur in which market structure(s) ?

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. What is the concentration ratio for Industry M?

A profit-maximizing firm in a monopolistically competitive market is characterized by which of the following?

Table 16-3 The following table shows the output produced by each of the top eight firms in four industries as well as the total industry output for those industries. -Refer to Table 16-3. Based on the concentration ratio, which industry is the most competitive?

Figure 16-3 This figure depicts a situation in a monopolistically competitive market. -Refer to Figure 16-3. At the profit-maximizing level of output, what is this firm's total cost of production?

Figure 16-12 -Refer to Figure 16-12. Does this monopolistically competitive market produce the welfare-maximizing level of output?

Both monopolistic competition and oligopoly are market structures

Regulation of a firm in a monopolistically competitive market

A monopolistically competitive firm faces the following demand schedule for its product: The firm has total fixed costs of $9 and a constant marginal cost of $3 per unit. The firm will maximize profit with

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 price should Peter charge to maximize his profits?

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

Figure 16-12 -Refer to Figure 16-12. Compare the price and marginal cost in this market with price and marginal cost if this were a perfectly competitive market.

Figure 16-10 The figure is drawn for a monopolistically-competitive firm. -Refer to Figure 16-10. At what quantity of output does average revenue exceed marginal revenue by $66.66?

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

Figure 16-12 -Refer to Figure 16-12. If this firm minimized cost, how much output will it produce?

The product-variety externality arises in monopolistically competitive markets because

Firms in monopolistically competitive markets and monopolies can earn long-run profits due to barriers to entry.