MICRO Chapter 13- Monopolistic Competition

The typical firm in a monopolistically competitive market:

is small relative to the entire market for its general product

A monopolistically competitive firm:

produces where MC= MR to maximize profit

Monopolistically competitive firms have some market power because of:

product differentiation

Ceteris Paribus, if a firm in a monopolistically competitive industry raises the price of its product:

sales may drop as consumers switch to the close substitutes that are offered by other firms in the industry

Profit Maximizing firms in monopolistically competitive markets:

sell products that are very similar to each other

Jane plans to open her own restaurant and wants to create a strong demand for her product as well make it less price elastic. All of the following are methods of product differentiation that would help her accomplish her goals except:

setting the price of her meals well below the prices charged by her rivals

If a monopolistically competitive firm is producing where marginal revenue is equal to marginal cost but price is greater than marginal cost, the firm:

should continue to produce at this point because it is already maximizing profit

The demand curves of firms in monopolistically competitive markets are relatively elastic compared to market demand due to:

the existence of very close substitutes

A market is imperfectly competitive when the:

the firms that make up the market have some control over the price of their products

All of the following are true regarding monopolistically competitive markets except:

the typical firm earns positive economic profit in the long run

All of the following are characteristics of a monopolistically competitive market except:

there are significant barriers to entry that prevent new firms from entering the market in the long run

For monopolistically competitive firms in long-run equilibrium, economic profit is:

zero because there are no barriers to entry

Which of the following is true for both monopoly firms that do not price discriminate and monopolistically firms in the long equilibrium

P > MC

In the long run, it is true that monopolistically competitive firms produce where:

P> MC and P> minimum average cost

260, 7-10, GRAPH

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261, 4-5, GRAPH

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262, 7-10, GRAPH

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A firm in a monopolistically competitive market is similar to a monopoly firm in that:

Both maximize profit by producing the quantity where marginal revenue equals marginal cost

Firms in monopolistically competitive markets:

attempt to differentiate their products

monopolistically competitive firm's market demand curve is:

downward-sloping and marginal rev lies below demand

Monopolistically competitive markets are comprised of:

many firms selling differentiated products

Monopolistically competitive firms:

may earn either profits or losses in the short run, but tend to earn zero.

A monopolistically competitive firm is similar to a perfectly competitive firm in that:

neither is guaranteed to earn positive economic profit in the short run