Homework 16: Monopolistic Competition
When firms in monopolistic competition are making an economic profit, firms will
enter the industry, and demand will decrease for the original firms.
In monopolistically competitive industries,
entry and exit push economic profits toward zero.
In monopolistic competition, in the long run firms have
excess capacity.
When firms in monopolistic competition incur an economic loss, some firms will
exit the industry, and demand will increase for the firms that remain.
Monopolistic competition differs from monopoly because in monopolistic competition
firms are free to enter and exit.
Which of the following is NOT true of monopolistic competition?
firms produce a good that is a perfect substitute for their competitors' goods.
Firms in which type of market earn zero economic profit in the long run?
perfect competition and monopolistic competition
Brand name aspirin is chemically identical to store brand aspirin. Yet, consumers often prefer the brand name product to the store brand product. This preference is an example of
product differentiation
The Firefox, Internet Explorer, and Opera browsers are an example of ________.
product differentiation
Which characteristic is associated with monopolistic competition?
product differentiation
Brand name drugs are chemically identical to their generic counterparts. Yet, consumers often prefer the brand name product to the generic product. Making consumers think that a brand name drug differs from its generic counterpart is an example of
product differentiation.
Brand names are an example of
product differentiation.
The key feature of monopolistic competition that distinguishes it from perfect competition is
product differentiation.
A firm is said to have excess capacity when it produces the amount of output
smaller than that which minimizes average total cost.
Monopolistic competition is a market in which ________ firms produce ________ goods and services.
many; differentiated
Monopolistic competition is a market structure in which:
-Firms are free to enter and exit the industry. -Firms produce a differentiated product.
A product that is a close substitute but not a perfect substitute for the products of the other firms is called
a differentiated product.
Firms in monopolistic competition can achieve product differentiation by
advertising special characteristics.
For a firm in monopolistic competition, the marginal cost curve intersects the average total cost curve
at the minimum average total cost.
A monopolistically competitive firm is like a monopoly firm insofar as
both have MR curves that lie below their demand curves.
A monopolistically competitive firm is like a perfectly competitive firm insofar as
both make zero economic profit in the long run.
How is a monopolistically competitive firm similar to a perfectly competitive firm?
both will observe entry into the industry if economic profit is positive
Firms in monopolistic competition charge prices that are ________ those of the other firms in the market.
close to
In monopolistic competition in the long run, firms ________.
make a normal profit and have excess capacity
In a monopolistically competitive market there are
many firms
Which of the following is a characteristic of monopolistic competition?
many firms
In monopolistic competition, there are
many firms making a differentiated product.
The profit maximizing condition for a firm in monopolistic competition is to produce so that
marginal cost equals marginal revenue.
In monopolistic competition, in the short run a firm maximizes its profit by selecting an output at which marginal cost equals
marginal revenue.
In monopolistic competition, when firms make an economic profit,
new firms enter the industry so that the price falls and the economic profit eventually falls to zero.
If firms in a monopolistically competitive industry are earning an economic profit, then
new firms will enter the industry.