MicroEconomics Chapter 10

Figure 10.1 shows the demand, marginal revenue, and cost curves for a monopolistic competitor. The price that the monopolistic competitor will charge at the profit-maximizing level of output is _____.

$10

Figure 10.5 shows the demand, marginal revenue, and cost curves for a monopolistically competitive firm. The profit-maximizing (or loss-minimizing) price for the firm is _____.

$3.25

Figure 10.4 shows the demand, marginal revenue, and cost curves for a monopolistic competitor. If the firm is producing at a profit-maximizing level of output, its total revenue is _____.

$5,700

Figure 10.1 shows the demand, marginal revenue, and cost curves for a monopolistic competitor. The monopolistic competitor's total economic profit at the profit-maximizing level of output is:

$750.

Figure 10.1 shows the demand, marginal revenue, and cost curves for a monopolistic competitor. The monopolistic competitor's profit-maximizing level of output is:

125 units.

Which of the following characteristics do firms in perfect competition have in common with firms in monopolistic competition?

Firms in both markets face competition from new entrants.

All of the following are examples of product differentiation except one. Which of the following is the exception?

Lowering the price of a good for a special sale

Which of the following is true of the relationship between price and marginal cost under monopolistic competition?

Price exceeds marginal cost at the profit-maximizing level of output

Which of the following factors makes a monopolistically competitive firm a price maker?

Product differentiation

Which of the following characteristics does perfect competition share with monopolistic competition?

Zero long-run economic profi

Figure 10.2 shows a firm that charges price P* for output q*. In order to minimize loss in the short run, the firm should:

continue to produce because price is greater than average variable cost.

The chances of successful collusion are greatest when:

demand curves and cost curves are similar across firms in an industry.

In a coordination game, a Nash equilibrium occurs when:

each player chooses the same strategy.

Figure 10.4 shows the demand, marginal revenue, and cost curves for a monopolistic competitor. At the profit-maximizing output level, the firm is:

earning an economic profit of $760.

It is harder to explain the behavior of firms in an oligopoly than in other market structures because:

firms base their decisions on what their rivals do.

One difference between perfect competition and monopolistic competition is that:

firms in perfect competition take full advantage of economies of scale in long-run equilibrium, whereas firms in monopolistic competition do not take advantage of economies of scale in long-run equilibrium.

FlyHigh Travel Agency, a monopolistic competitor, offers services that are differentiated from the services of other producers in the industry. This implies that it:

has some control over the price it charges.

A cartel's marginal cost curve is the:

horizontal sum of all the individual firms' marginal cost curves.

A monopolistically competitive firm is producing at an output level where marginal revenue is greater than marginal cost. This firm should _____ quantity and _____ price to increase profit or reduce losses.

increase; decrease

In the long run, the demand curve facing a monopolistically competitive firm:

is tangent to the firm's average total cost curve

If a monopolistically competitive firm raises its price, it:

loses some, but not all, of its customers

Monopolistically competitive industries consist of:

many firms, each selling a slightly different product.

The use of game theory in studying the behavior of firms in an oligopoly implies that firms:

may attempt to avoid the worst outcome but may achieve a less-than-optimal outcome

A monopolistic competitor's demand curve is

more elastic than a monopolist's or oligopolist's but less elastic than a perfect competitor's demand curve.

Figure 10.3 shows the demand, marginal revenue, and cost curves for a monopolistic competitor. In the long run, _____.

new firms will enter the market, driving economic profit to zero

Bubba's Baby Boutique is a monopolistically competitive firm. In the long run, it earns:

normal profit but zero economic profit.

Interdependent decision making on price, quality, or advertising is a characteristic of:

oligopolies.

The prisoner's dilemma is a situation in which:

players have difficulty in choosing a strategy based on trust.

Monopolistically competitive firms do not achieve allocative efficiency in the long run because:

price is greater than marginal cost.

A profit-maximizing firm in monopolistic competition should shut down in the short run if:

price is less than average variable cost.

Figure 10.3 shows the demand, marginal revenue, and cost curves for a monopolistic competitor. In the short run, the firm will _____.

produce 10 units at a price of $40 per unit

Suppose firms in a monopolistically competitive industry are currently earning short-run economic profit. In the long run, the demand curve facing each individual firm is likely to:

shift to the left and become flatter.

In both monopolistic competition and a non-price-discriminating monopoly, _____.

the marginal revenue curve lies below the demand curve

A common feature of monopolistic competition, pure monopoly, and perfect competition is that _____.

the profit-maximizing condition in each market is the same

If there occurs a permanent decrease in the demand for convenience store services, _____ in the long run

there will be a decrease in the number of such stores

In the short run, a monopolistically competitive firm continues to increase production _____ if it can at least cover its variable cost.

until MR = MC

Oligopolists are more sensitive to the pricing and output policies of their rivals when:

all firms produce identical products.

Monopolistically competitive firms _____.

are price makers

A firm experiences economies of scale if

average cost declines as output increases.

In an oligopoly, the demand curve facing an individual firm depends upon the:

behavior of competing firms.