BUSI620 WK4 HW

A firm in monopolistic competition faces a demand curve with own-price elasticity equal to -2 and an advertising elasticity equal to 0.2.This firm should devote ___________% of its revenues to advertising

10

What is the marginal revenue (MR) of the inverse linear demand function, P(Q) = a + bQ?

MR = a + 2bQ

Given a revenue function, R = R(Q), what is the marginal revenue (MR)?

MR = dR/dQ

For a perfectly competitive firm, marginal revenue is equal to the market

price

When firms in monopolistic competition earn positive economic profits, other firms tend to the market.

enter

A market with many "small" buyers and sellers, identical products, no transaction costs, and free entry and exit where buyers and sellers have perfect information is called

perfect competition

In a perfectly competitive market, the individual producer's demand curve is the market

price

A firm in monopolistic competition faces a demand curve with own-price elasticity equal to -5 and an advertising elasticity equal to 0.15.This firm should devote % of its revenues to advertising

3

When firms in monopolistic competition earn positive economic profits, how will additional firms react?

Additional firms enter and produce variations of the product.

Define the competitive firm's demand.

Df = P = MR

A monopolist's marginal revenue (MR) is given by:

MR = P(1 + E/E)

Suppose a market contains one supplier of a good that has no close, available substitutes. What type of market structure is this?

Monopoly

Which is a strategy firms use to tailor goods and services to meet the needs of a particular segment of the market?

Niche marketing

what happens in a perfectly competitive industry when firms earn profits?

Price falls Profits of remaining firms fall Supply increases

As firms exit a perfectly competitive industry in the long run, what happens to the profits of the remaining firms?

Profits increase due to increased market price.

In perfect competition, profit equals

Revenues - Costs

Which of the following is NOT a source of monopoly power?

Free entry and exit

A monopolist's linear inverse demand curve is P(Q) = 750 - 3Q. Which of the following is the monopolist's marginal revenue?

MR = 750 - 6Q

Since each producer in a perfectly competitive market has no influence on market price, the demand curve for the individual firm is

a horizontal line equal to the market price.

Suppose an organic salad shop attempts to increase demand for its food by differentiating itself as a healthy alternative to fast-food hamburgers. This is an example of advertising. (Enter one word in the blank)

comparative

The monopolist is restricted to price-quantity combinations that lie on the demand curve as a result of decisions made by

consumer

The welfare loss to society due to the level of output produced by a monopolist is called the loss of monopoly.

deadweight

If MR is less than MC, a profit-maximizing monopolist should:

decrease output to maximize profits

For a monopolist, it is necessary to _______ price to increase output by one unit. As a result, the price received from all previous units _________.

decrease; decreases

In order to maximize profits, a monopolist should produce where marginal revenue is ________ marginal cost.

equal to

A monopolist charges a ________ price and produces ________ output than a perfectly competitive industry.

higher; less

The demand curve for a perfectly competitive firm is a _______ line at the market ____________. (Enter one word in each blank)

horizontal price

When a monopolist increases output by one unit, total revenue

increases by less than price.

In monopolistic competition, each firm uses the ___________ demand curve and the marginal revenue curve to establish output and price. In monopoly, the firm uses the __________ demand curve and the marginal revenue curve to establish output and price.

individual; market

A monopolist faces a downward-sloping demand curve. As a result,

it can choose a price or a quantity, but not both.

When many buyers and sellers freely enter and exit a market having similar, yet differentiated products, it is called _

monopolistic competition

Fast-food hamburgers are characterized by a large group of sellers producing slightly different goods. What type of market is this?

monopolistically competitive

Economies of scale and scope, cost complementarity, and patents are all sources__________ power.

monopoly

The market structure where a firm has a large degree of market power is called

monopoly

In order to maximize profits in the short run, a manager must determine how much output should be produced, given

only variable inputs within his or her control.

π = P(Q) - C(Q) defines

profits

Marginal revenue is the __________ of the total revenue curve.

slope

Marginal revenue is

the change in total revenue from a one-unit change in output.

The price an individual producer in a perfectly competitive market faces is determined by:

the market supply and market demand

What is the key difference in determining the profit-maximizing price and output under monopoly versus monopolistic competition?

there is no difference