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Exam 16: Monopolistic Competition

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Question 91

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Figure 16-3 -Refer to Figure 16-3. What price will the monopolistically competitive firm charge in this market?

A) $400
B) $600
C) $700
D) $800

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

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Question 92

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Table 16-3 A monopolistically competitive firm has the following cost structure: ​ ​ $\begin{array} { | c | c | } \hline \begin{array} { c } \text { Output } \\\text { (Units) }\end{array} & \begin{array} { c } \text { Total Cost } \\\text { (Dollars) }\end{array} \\\hline 1 & 30 \\\hline 2 & 32 \\\hline 3 & 36 \\\hline 4 & 42 \\\hline 5 & 50 \\\hline 6 & 63 \\\hline 7 & 77 \\\hline\end{array}$ ​ -Refer to Table 16-3. The monopolistically competitive firm faces the following demand curve: ? $\begin{array} { | c | c | } \hline \begin{array} { c } \text { Quantity } \\\text { (Units) }\end{array} & \begin{array} { c } \text { Price } \\\text { (Dollars per unit) }\end{array} \\\hline 1 & 20 \\\hline 2 & 18 \\\hline 3 & 15 \\\hline 4 & 12 \\\hline 5 & 9 \\\hline 6 & 7 \\\hline 7 & 4 \\\hline\end{array}$ If the government forces this firm to produce at its efficient scale, it will

A) produce 3 units and make $9.
B) produce 4 units and make $6.
C) produce 5 units and lose $5.
D) produce 7 units and lose $49.

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

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Question 93

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If we observe a great deal more advertising for Mucinex, an over-the-counter drug, than for a Grainger drill press, we can infer that

Scenario 16-1 Venya 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. Venya's demand and cost values for sales per day are given in the following table. (Everyone who purchases Venya's ice cream buys a double scoop cone because it's so delicious.) ​ ​ ​ -Refer to Scenario 16-1. How many double scoop ice cream cones should Venya sell per day to maximize his profit?

Monopolistic competition and monopoly are examples of a market structure called imperfect competition.

A monopolistically competitive firm is currently producing 25 units of output. At this level of output the firm is charging the highest price it can at $30, has marginal revenue equal to $21, has marginal cost equal to $21, and has average total cost equal to $22. From this information we can infer that

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

When a firm operates at efficient scale, it is producing at the minimum point on its average total cost curve.

Scenario 16-2 Delish, a moderately priced restaurant, has recently announced intentions to open a restaurant in Boston, MA. Assume that the restaurant market in Boston is characterized by monopolistic competition. -Refer to Scenario 16-2. As a result of the new restaurant, consumers in Boston are likely to experience a

Figure 16-6 The figure is drawn for a monopolistically competitive firm. ​ -Refer to Figure 16-6. In order to maximize its profit, the firm will choose to produce

A new Mexican restaurant opens in the city of Manchester. The residents are happy about this new restaurant because they are experiencing what externality?

A monopolistically competitive firm chooses

To be considered an oligopoly, the market must have a concentration ratio below 50%.

Oligopoly and monopolistic competition are examples of a market structure called imperfect competition.

Economists are unanimous in their belief that advertising is socially inefficient.

There are four basic types of market structure.

Which market structure(s) include(s) many firms with differentiated products who can enter and exit the market freely?

The product-variety externality and the business-stealing externality are both spillover benefits of new firms entering a monopolistically competitive market.

The term excess capacity refers to the fact that a firm produces a lower quantity than it would if it operated at the efficient scale.

Table 16-4 Beatrice's Birthday Cakes operates in a monopolistically competitive market, so it is one bakery among many in the market for birthday cakes. The following table presents cost and revenue data for birthday cakes at Beatrice's. ​ ​ ​ ​ -Refer to Table 16-4. At the profit-maximizing quantity, what is Beatrice's total profit?