Chapter 13 Econ quiz

There are 10 firms in an industry, and each firm has a market share of 10 percent. The industry's Herfindahl index is

1,000

Monopolistic competition is characterized by a

large number of firms and low entry barriers

Suppose that a monopolistically competitive restaurant is currently serving 230 meals per day (the output where MR = MC). At that output level, ATC per meal is $10 and consumers are willing to pay $12 per meal. Suppose that the allocatively efficient output level in long-run equilibrium is 200 meals. In long-run equilibrium, suppose that this restaurant charges $11 per meal for 180 meals and that the marginal cost of the 180th meal is $8. What is the size of the firm's economic profit?

0

A restaurant, legal assistance, and clothing industries are each illustrations of

monopolistic competition

Under monopolistic competition, entry to the industry is

more difficult than under pure competition but not nearly as difficult as under pure monopoly

Which of the following best describes the efficiency of monopolistically competitive firms?

neither allocatively efficient nor productively efficient

Suppose that a monopolistically competitive restaurant is currently serving 230 meals per day (the output where MR = MC). At that output level, ATC per meal is $10 and consumers are willing to pay $12 per meal. Will there be an entry or exit?

entry

Refer to the diagram for a monopolistically competitive firm in short-run equilibrium. This firm's profit-maximizing price will be

$16

Suppose that a monopolistically competitive restaurant is currently serving 230 meals per day (the output where MR = MC). At that output level, ATC per meal is $10 and consumers are willing to pay $12 per meal. What is the size of this firm's profit or loss?

$460

Monopolistic competition means

many firms producing differentiated products

Consider the diagram below depicting the demand and cost conditions faced by a monopolistically competitive firm. On the graph, show the difference in the output produced under profit maximization, productive efficiency, and allocative efficiency respectively. In which of these three situations is highest output level produced?

productive efficiency

Use your basic knowledge and your understanding of market structures to answer this question. Which of the following companies most closely approximates a monopolistic competitor?

subway sandwiches

Suppose that a small town has seven burger shops whose respective shares of the local hamburger market are (as percentages of all hamburgers sold): 27%, 25%, 21%, 12%, 8%, 5%, and 2%. What is the Herdindahl index for the hamburger industry in this town?

2,032

When a monopolistically competitive firm is in long-run equilibrium,

MR=MC and P> minimum ATC

Refer to the diagrams, which pertain to monopolistically competitive firms. Short-run equilibrium entailing economic loss is shown by

diagram C only

Suppose that a small town has seven burger shops whose respective shares of the local hamburger market are (as percentages of all hamburgers sold): 27%, 25%, 21%, 12%, 8%, 5%, and 2%. What is the four-firm concentration ratio of the hamburger industry in this town?

85%

In the small town of Geneva, there are 5 firms that make watches. The firms' respective output levels are 30 watches per year, 20 watches per year, 20 watches per year, 20 watches per year, and 10 watches per year. The four-firm concentration ratio for the town's watch-making industry is:

90%

Suppose that a small town has seven burger shops whose respective shares of the local hamburger market are (as percentages of all hamburgers sold): 27%, 25%, 21%, 12%, 8%, 5%, and 2%. If the top three sellers combined to form a single firm, what would happen to the four-firm concentration ration and the Herfindahl index?

98% (four-firm concentration ratio) 5,566 (Herfindahl index)

Consider the diagram below depicting the revenue and cost conditions faced by a monopolistically competitive firm, and then answer the following questions. The resulting price and quantity combination is illustrated in graph above by point _____.

D

Refer to the diagram for a monopolistically competitive firm. Long-run equilibrium output will be

D

nonprice competition refers to

advertising, product promotion, and changes in the real or perceived characteristics of a product

Excess capacity refers to the

amount by which actual production falls short of the minimum ATC output

The monopolistically competitive firm shown in the figure

cannot operate profitably in the short run

Consider the diagram below depicting the revenue and cost conditions faced by a monopolistically competitive firm, and then answer the following questions. At this resulting price and quantity combination, the firm would experience

economic profit

Suppose that a monopolistically competitive restaurant is currently serving 230 meals per day (the output where MR = MC). At that output level, ATC per meal is $10 and consumers are willing to pay $12 per meal. Will this restaurant's demand curve shift left or right?

left

Suppose that a monopolistically competitive restaurant is currently serving 230 meals per day (the output where MR = MC). At that output level, ATC per meal is $10 and consumers are willing to pay $12 per meal. Suppose that the allocatively efficient output level in long-run equilibrium is 200 meals. In long-run equilibrium, suppose that this restaurant charges $11 per meal for 180 meals and that the marginal cost of the 180th meal is $8. Is the deadweight loss for this firm greater than or less than $60?

less than

Compared to pure monopoly and pure competition, monopolistically competitive industries

might have economic profits, they will diminish as competitors enter, and there will be productive inefficiency

"In the long run, monopolistic competition leads to monopolistic price but not to monopolistic profits" This statement is

true, since P>MC, but the availability of close substitutes pushes the price of the average firm down until it equals ATC