econ 2100 chapter 16

For a profit-maximizing monopolistically competitive firm, price exceeds marginal cost in

both the short run and the long run

Refer to Figure 16-2. At the profit-maximizing level of output, what is this firm's total cost of production?

$1400

Refer to Figure 16-1. In order to maximize profit, the firm will charge a price of

$18

Refer to Figure 16-2. How much consumer surplus will be derived from the purchase of this product at the monopolistically competitive price?

$200

Refer to Figure 16-2. How much profit will the monopolistically competitive firm earn in this situation?

$200

Refer to Figure 16-1. If the average total cost is $15 at the profit-maximizing quantity, then the firm's maximum profit is

$36

Refer to Figure 16-1. If the average variable cost is $13 at the profit-maximizing quantity, and if the firm's profit is $20 at that quantity, then its fixed costs amount to

$40

Refer to Figure 16-1. If the average variable cost is $12 at the profit-maximizing quantity, and if the firm's fixed costs amount to $30, then the firm's maximum profit is

$42

Refer to Figure 16-2. What price will the monopolistically competitive firm charge in this market?

$80

Refer to Figure 16-1. The firm's profit-maximizing level of output is

12 units

Refer to Figure 16-2. How much output will the monopolistically competitive firm produce in this situation?

20 units

A monopolistically competitive firm faces the following demand schedule for its product: (table) The firm has total fixed costs of $20 and a constant marginal cost of $2 per unit. The firm will maximize profit with

9 units of output

In the short run, a firm operating in a monopolistically competitive market can earn

All of the above are possible (positive economic profits, economic losses and zero economic profits)

Refer to Figure 16-2. Which of the following will occur in the long run in this industry?

Firms will enter this industry

Refer to Figure 16-1. If the ATC=20 at the profit-maximizing level of output, which of the following will occur in the long run in this industry?

Firms will exit this industry

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

P > MC

Refer to Figure 16-1. Suppose that average total cost is $18 when Q=12. What is the profit-maximizing price and resulting profit?

P=$18, profit=$0

Refer to Figure 16-2. What is the profit-maximizing price, quantity, and resulting profit?

P=$80, Q=20 units, profit=$200

Which of the following is not a key feature of monopolistic competition?

Positive economic profits for firms in the long run

Some firms have an incentive to advertise because they sell a

differentiated product and charge a price above marginal cost

Refer to Figure 16-1. Suppose ATC = $18 when Q = 12. Then the

firm is in a long-run equilibrium when it produces 12 units of output

Which of the following is not a characteristic of monopolistic competition?

firms are price takers

Refer to Figure 16-2. This firm is operating

in the short run and earning a positive economic profit

A monopolistically competitive industry is characterized by

many firms, differentiated products, and free entry

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

marginal revenue equals marginal cost

A market structure in which there are many firms selling products that are similar but not identical is known as

monopolistic competition

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

price exceeds marginal cost

Refer to Figure 16-1. Suppose you were to add the ATC curve to the diagram to show the firm in a situation of long-run equilibrium. You would draw the ATC curve

tangent to the demand curve at the point (Q = 12, P = $18)