Chapter 13 HW 09
Figure 13-4 shows cost and demand curves for a monopolistically competitive producer of iced-tea. Refer to Figure 13-4. What is the firm's profit-maximizing price?
$16
Which of the following describes the relative positions of the demand curve and the average total cost (ATC) curve of a monopolistically competitive firm that earns a profit in the short run?
In the short run, the firm's demand curve will lie above its ATC curve. The demand curve will be tangent to the ATC curve in the long run
Refer to Figure 13-8. Which of the following statements describes the firm depicted in the diagram?
The firm is in long-run equilibrium and is breaking even
Refer to Figure 13-3. Which of the following statements describes the best course of action for the firm depicted in the diagram?
The firm should minimize its losses by producing Qy units and charging a price of P1
Which of the following describes a difference between the marginal revenue and demand curves of a perfectly competitive firm and a monopolistically competitive firm?
The perfectly competitive firm's marginal revenue and demand curves are the same; the marginal revenue curve of a monopolistically competitive firm lies below its demand curve
Refer to Figure 13-1. The marginal revenue from one additional unit sold is the sum of the gain in revenue from selling the additional unit and the loss in revenue from having to charge a lower price to sell the additional unit. Based on the diagram in the figure,
Y represents the gain (output effect) and X the loss (price effect)
A monopolistically competitive market is described as one in which there are
a large number of firms selling similar, but not identical, products
Monopolistic competition is a market structure in which
barriers to entry are low
Both monopolistically competitive firms and perfectly competitive firms maximize profits
by producing where marginal revenue is equal to marginal cost
To maximize their profits and defend those profits from competitors, monopolistically competitive firms must
differentiate their products
Because the monopolistically competitive firm faces a ________ demand curve for its product, it ________ the price of its output.
downward-sloping can influence
Figure 13-4 shows cost and demand curves for a monopolistically competitive producer of iced-tea. Refer to Figure 13-4. At the profit-maximizing output level the firm will
earn a profit of $88
If firms in a monopolistically competitive industry are making profits in the short run,
new firms will enter the market
Refer to Figure 13-4. Based on the diagram, one can conclude that
new firms will enter the market
Table 13-2 shows the demand and cost data facing a monopolistically competitive producer of canvas bags. Refer to Table 13-2. What are the firm's profit-maximizing or loss-minimizing price and quantity?
price $12 quantity 4
The entry and exit of firms in a monopolistically competitive market guarantee that
price equals average total cost in the long run
Table 13-2 shows the demand and cost data facing a monopolistically competitive producer of canvas bags. Refer to Table 13-2. At the profit-maximizing or loss-minimizing output level
profit of $16
In the long run, if the demand curve of a monopolistically competitive firm is tangent to its average total cost curve then
the firm would break even
If a monopolistically competitive firm lowers its price and, as a result, its total revenue decreases then
the output effect of the price change was less than the price effect
The Jeans Store sells 7 pairs of jeans per day when it charges $100 per pair. It sells 8 pairs of jeans per day at a price of $90 per pair. The marginal revenue of the eighth pair of jeans is
$20
Suppose a monopolistically competitive firm's output where marginal revenue equals marginal cost is 66 units and the price corresponding to this quantity is $18. If the average total cost at this output is $16.55, then its total profit is
$95.70
Figure 13-4 shows cost and demand curves for a monopolistically competitive producer of iced-tea. Refer to Figure 13-4. What is the profit-maximizing output level?
22 cases
Figure 13-3 shows short-run cost and demand curves for a monopolistically competitive firm in the footwear market. Refer to Figure 13-3. Which of the following is the area that represents the profit or loss experienced by the firm?
A loss represented by the rectangle P2uvP1.
If firms in a monopolistically competitive market are earning economic profits, which of the following scenarios best reflects the change a representative firm experiences as the market adjusts to its long-run equilibrium?
Demand decreases and becomes more elastic
Long-run equilibrium under monopolistic competition and perfect competition is similar in that
Firm breaks even
For the monopolistically competitive firm,
P = AR > MR
Which of the following is true for a monopolistically competitive firm in long-run equilibrium?
P = ATC and MR = MC
Refer to Figure 13-7. What is the output price?
P4
Refer to Figure 13-7. What is the area that represents the firm's profit?
P4EDP2
Refer to Figure 13-7. What is the profit maximizing output level?
Q4
Refer to Figure 13-1. What is the marginal revenue of the sixth unit of output?
$4
Tony's Italian Ice is a monopolistically competitive firm. If Tony's earns a profit in the short run, which of the following is most likely to occur?
New firms that sell Italian ice will enter the market and Tony's demand curve will shift to the left
Refer to Figure 13-7. If the diagram represents a typical firm in the market, what is likely to happen in the long run?
New firms will enter the market causing the demand to decrease for existing firms
Monopolistically competitive firms can differentiate their products
Through marketing