ECON 206 Monopolisitic Competition

Suppose Carl's Candies sells 100 boxes of candy for $4 each. The total fixed cost of the 100 boxes is $100, and the average variable cost of the 100 boxes is $1.50 per box. Carl's makes a profit per unit of:

$1.50.

Referring to the graph, what is the profit maximizing price?

$140

__________ efficiency is producing the goods and services that consumers most want in such a way that the marginal benefit equals the marginal cost.

Allocative

What is one way that monopolistic competition is similar to a monopoly?

Both have some control over prices.

In a monopolistically competitive market, which of the following represents a long-run adjustment?

Firms enter the market due to economic profits.

Which of the following markets could be considered monopolistically competitive? (Choose all that apply.)

Hotels Clothing Fast food

Use the graph of a monopolistically competitive firm above to answer the following question. What is the amount of profit or less Monica will make at the profit maximizing price and quantity?

Profit of $2000

In monopolistic competition, once you find the profit-maximizing quantity, how do you find the profit-maximizing price?

You read the corresponding price from the demand curve.

Which of the following is not a characteristic of monopolistic competition?

The products are standardized.

Monopolistic competition is a market characterized by:

a relatively large number of sellers producing a differentiated product - for which they have some control over the price they charge - in a market with relatively easy market entry and exit.

For monopolistically competitive firms, ________ their products is important because many consumers do not like taking risks, and this way they can learn about products before buying them.

advertising

Monopolistically competitive markets:

combine characteristics of competitive markets and pure monopolies

A market structure characterized by a relatively large number of sellers producing a differentiated product - for which they have some control over the price they charge - in a market with relatively easy market entry and exit is known as monopolistic

competition

In a monopolistically competitive market - each firm produces a _______ product - so firms face downward-sloping demand curves.

differentiated

Because the products of monopolistically competitive firms are ________ from other companies in their industry, the demand curve they face is __________ sloping.

differentiated, downward

The strategy of distinguishing one firm's product from the competing products of other firms is called product

differentiation

When monopolistically competitive firms follow the marginal revenue and the marginal cost rule, the result can be ______ profits, ______ profits, or even losses, depending on market conditions.

economic, normal

Monopolistic competition and perfect competition have one main characteristic in common: relatively easy market ______ and _______.

entry, exit

In a(n) ________ competitive market, consumers can usually find exactly what they are looking for, based on their preferences and budgets.

monopolistic

One way in which monopolistic competition and monopoly differ is that:

monopolistic competition has many sellers, and monopoly has one seller.

For ________ competitive firms, branding serves as a signal to consumers about the products they are going to purchase.

monopolistically

Because _______ competitive firms have some control over prices, the firm will charge consumers the price they are willing and able to pay for the available output, which is found by projecting the profit-maximizing output level onto the ________ curve.

monopolistically, demand

The long-run equilibrium in a monopolistically competitive market results in firms realizing _______ profits, which removes all incentives for firms to enter or exit the industry.

normal

Referring to the graph, Sandra's Sweets is a monopolistically competitive firm that produces 120 cakes. This level of production is:

not productively or allocatively efficient.

Monopolistic competition and a monopoly are:

not the same market structure

A clear benefit to monopolistic competition for consumers is product

variety

Which of the following markets would most closely resemble monopolistic competition?

Wine

What do profits and losses in a monopolistically competitive markets lead to in the long run?

Entry into and exit from the market.

Deadweight loss represents the amount of consumer surplus and producer surplus forgone because the monopolistically competitive firm charges a price ______ than the marginal cost.

higher

Compared to perfect competition, a benefit of monopolistic competition for consumers is:

increased product variety.

Suppose Carl's Candies sells 100 boxes of candy for $4 each. The total fixed cost of the 100 boxes is $100 - and the average variable cost of the 100 boxes is $1.50 per box. Carl's makes a total profit of:

$150.

What would happen to a firm's demand in a monopolistically competitive market if there was an increase in the number of consumers?

Demand would increase.

_______ profit creates an incentive for other monopolistically competitive firms to enter the market.

Economic

The value of the economic surplus that is forgone when a market is not allowed to adjust to its competitive equilibrium is the ______ loss.

deadweight

Monopolistic competition and perfect competition have one main characteristic in common: relatively ________ market entry and exit.

easy

Total revenue minus the ______ and _______ costs of production is economic profit

implicit, explicit

Referring to the graph, the profit or loss amount for Sandra's Sweets at the profit-maximizing output and price is $

-1280

Using the table, which shows a monopolistically competitive firm's demand schedule, marginal revenue, and marginal cost to answer the following question. The profit maximizing price for this firm is $

7

Which of the following characteristics of monopolistic competition helps to best explain why consumers can usually find exactly what they are looking for based on their preferences and budgets?

A differentiated product

In order for a monopolistically competitive firm to produce at a point that is both productively and allocatively efficient, which of the following has to be true about the profit-maximizing quantity?

Demand = Marginal Cost = ATC

What would happen to a firm's demand in a monopolistically competitive market if there was less competition in the market?

Demand would become more inelastic

What is true about firms in monopolistic competition in the short-run?

Monopolistically competitive firms can generate an economic profit, a normal profit, or an economic loss.

Profit maximization implies that monopolistically competitive firms should expand production up to the point where the marginal revenue equals the marginal cost. (True or False)

True

Producing the goods and services that consumers most want in such a way that the marginal benefit equals the marginal cost is:

allocative efficiency.

Through advertising and branding, monopolistically competitive firms increase the demand for their products and make those demands relatively more ________, allowing them to charge higher _________ and generate ________ economic profits.

inelastic, price, greater

The output level for a monopolistically competitive firm is lower than the output level that achieves the minimum average total cost for the firm and, as such:

is not productively efficient in the long run.

The presence of many monopolistically competitive firms in an industry makes the firm unable to produce enough output to reach the ______ average total cost, so the firms have _______ capacity to produce.

minimum, excess

________ competitive firms have an incentive to continuously improve and differentiate their products to have more control over their prices and, they hope, to earn more ________ profit.

monopolistically, economic

__________ competitive firms have an incentive to continuously improve and differentiate their products to have more control over their prices and, they hope, to earn more ________ profit.

monopolistically, economic

Through advertising and branding, _______ competitive firms increase the demand for their products and make those demands relatively _______, allowing them to charge ______ prices and generate larger economic profits.

monopolistically, more, greater

The demand for a monopolistically competitive firm is ______ elastic than the demand faced by a pure monopoly because of the availability of close substitutes.

more

A(n) ________ profit simply indicates that the firm is doing just as well as it would have if it had chosen to use its resources to produce a different product or to compete in a different industry.

normal

In the long run, a monopolistically competitive firm will charge a(n) ________ equal to the average total cost per unit produced.

price

The availability of close substitutes in monopolistically competitive markets allows consumers to be more responsive to ________ changes.

price

Producing output at the lowest possible total cost of production per unit is _________ efficiency.

productive

Producing output at the lowest possible total cost per unit of production is:

productive efficiency.

A monopolistically competitive firm produces less output than would be _______ efficient.

productively

A monopolistically competitive firm should produce output until the marginal _______ equals the ______ marginal .

revenue, cost