ECON Ch. 13

A monopolistically competitive firm has a

highly elastic demand curve

The graph depicts a monopolistically competitive firm. In the short run, this monopolistically competitive firm will set the price at

$65 and produce 35 units of output

Refer to the diagram for a monopolistically competitive firm in short-run equilibrium. The profit-maximizing output for this firm will be

160

Refer to the above graphs. A short-run equilibrium that would produce profits for a monopolistically competitive firm would be represented by graph

A

Dequam likes product variety, while Natasha is most concerned about paying the lowest price possible for a good. This suggests that

Dequam prefers monopolistically competitive industries, while Natasha prefers purely competitive industries.

Which of the following statements is correct?

In the long run, purely competitive firms and monopolistically competitive firms earn zero economic profits, while pure monopolies may or may not earn economic profits.

The monopolistically competitive firm shown in the figure

cannot operate profitably in the short run

In the long run, a representative firm in a monopolistically competitive industry will end up

earning a normal profit, but not an economic profit.

Monopolistic competition means

many firms producing differentiated product

Communist central planners didn't care about product differentiation, opting instead for a uniform design of products in order to achieve

mass production and lower costs

At long-run equilibrium in monopolistic competition, there is

neither allocative nor productive efficiency

Demand and marginal revenue curves are downward-sloping for monopolistically competitive firms because

product differentiation allows each firm some degree of monopoly power

A monopolistically competitive industry combines elements of both competition and monopoly. The monopoly element results from

product differentiation.

In which of these continuums of degrees of competition (highest to lowest) is monopolistic competition properly placed?

pure competition, monopolistic competition, oligopoly, pure monopoly

Firms in an industry will not earn long-run economic profits if

there is free entry and exit of firms in the industry