Micro final - chapter 14

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

-average revenue exceeds marginal revenue -marginal revenue equal marginal cost -price exceeds marginal cost

Critics of advertising argue that advertising

-creates desires that otherwise might not exits -hinders competition -often fails to convey substantive information

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

-positive economic profits -economic losses -zero economic profits

Firms that spend a large amount of money on advertising a particular product are likely to be providing consumers with

a signal of product quality

Antitrust laws allow the government to

break up companies

How does advertising signal to consumers that the product is a good one?

by willing to spend money on advertising, firms let consumers know the product tis likely a good one since firms would not likely advertise a poor product

Monopolistic competition is an inefficient market structure because

-price exceeds marginal cost -it has a deadweight loss, just as monopoly does -at the equilibrium, some consumers will value the good at more than the marginal cost of production

The profit maximization problem for a monopolist differs from that of a competitive firm in which of the following ways?

a competitive firm maximizes profit at the point where average revenue equals marginal cost; a monopolist maximizes profit at the point where average revenue exceeds marginal cost

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

chooses a price that exceeds marginal revenue

"In a long run equilibrium, price is equal to average total cost." This statement applies to

competitive and monopolistically competitive markets, but not to monopolies

For a monopoly market , total surplus can be defined as the value of the food to

consumers minus the cost of producing the good

Refer to Figure 16-4. Which of the following will occur in the long run in this industry?

firms will enter this industry

In order to sell more of its product, a monopolist must

lower its price

A monopolistically competitive industry is characterized by

many firms, differentiated products, and free entry

Which of the following statements is NOT correct?

monopolistically competitive firms advertised in order to increase the elasticity of the demand curve they face

For a monopolist, when does marginal revenue exceed revenue?

never

A profit-maximation monopolist charges a price of $14. The intersection of the marginal revenue curve and the marginal cost curve occurs where output is 15 units and marginal cost is $7. What is the monopolist's profit?

not enough info

A firm is a price taker

only when the market is perfectly competitive

Long run profit earned by a monopolistically competitive firm is driven to the competitive level due to a(n)

shift of its demand curve