Chapter 13 Monopolistic Competition

Which is true of pure competition but not of monopolistic competition?

Long-run equilibrium occurs at the minimum point on the ATC curve.

Which of the following is not characteristic of long-run equilibrium under monopolistic competition?

Price equals minimum average total cost.

Refer to the above graph for a representative firm in monopolistic competition in a constant-cost industry. This firm is

in short-run equilibrium, but not long-run equilibrium.

Economic analysis of a monopolistically competitive industry is more complicated than that of pure competition because

of product differentiation and consequent product promotion activities.

Refer to the diagram for a monopolistically competitive firm in short-runequilibrium. This firm's profit-maximizing price will be

$16.

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

160

Assume that the short-run cost and demand data given in the tables below confront a monopolistic competitor selling a given product and engaged in a given amount of product promotion. What output and price levels will maximize the firm's profit in the short run?

4 units and $40

Assume that the short-run cost and demand data given in the tables below confront a monopolistic competitor selling a given product and engaged in a given amount of product promotion. What will the maximum total profits be?

90

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.

In short-run equilibrium, the monopolistically competitive firm shown will set its price

below ATC.

The monopolistically competitive firm shown in the figure

cannot operate profitably in the short run.

Refer to the diagrams, which pertain to monopolistically competitive firms. A short-run equilibrium entailing economic profits is shown by

diagram b only.

Refer to the diagrams, which pertain to monopolistically competitive firms. Long-run equilibrium is shown by

diagram c only.

When a monopolistically competitive firm is in long-run equilibrium,

marginal revenue equals marginal cost and price equals average total cost.

"Variety is the spice of life" is best applied to which market structure?

monopolistic competition

The demand curve of a monopolistically competitive producer is

more elastic than that of a pure monopolist, but less elastic than that of a pure competitor.

If all monopolistically competitive firms in the industry have profit circumstances similar to the firm shown,

new firms will enter the industry.

Refer to the diagram. If all monopolistically competitive firms in the industry have profit circumstances similar to the firm shown above,

new firms will enter the industry.

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

product differentiation allows each firm some degree of monopoly power.

Refer to the diagram for a monopolistically competitive firm in short-run equilibrium. This firm will realize an economic

profit of $480.