Microeconomics Final Exam
Monopolistically competitive firms
May realize either profits or losses in the short run, but realize normal profits in the long run
Which set best describes the basic features of monopolistic competition
Easy entry, many firms, and differentiated products
The kinked-demand curve of an oligopolist is based on the assumption that:
Competitors will follow a price cut but ignore a price increase
The kinked-demand curve describes a situation in which an oligopolist will be
Anxious to lower price but not to increase price
If an oligopoly is faced with a kinked-demand curve that is relatively elastic above, and relatively inelastic below, the going price, then it will
Decrease total revenue by either decreasing or increasing price
The quantity from the minimum ATC and the monopolistically competitive profit maximizing quantity is called
Excess Capacity
The demand curve for a Monopolistic firm is
Is more elastic than a monopoly curve
Suppose an oligopolistic producer assumes its rivals will ignore a price increase but match a price cut: In this case the firm perceives its
Its demand curve as kinked, being steeper below the going price than above
An industry of a large number of sellers with no barriers to entry, where each firm has a small market share and sell differentiated products is an example of
Monopolistic Competition
A monopolistically competitive industry combines elements of both competition and monopoly. The monopoly element results from
Product differentiation
A Monopolistic structure has elements of a monopoly because
Product differentiation allows for some individual seller power
