econ 2100 chapter 16
For a profit-maximizing monopolistically competitive firm, price exceeds marginal cost in
both the short run and the long run
Refer to Figure 16-2. At the profit-maximizing level of output, what is this firm's total cost of production?
$1400
Refer to Figure 16-1. In order to maximize profit, the firm will charge a price of
$18
Refer to Figure 16-2. How much consumer surplus will be derived from the purchase of this product at the monopolistically competitive price?
$200
Refer to Figure 16-2. How much profit will the monopolistically competitive firm earn in this situation?
$200
Refer to Figure 16-1. If the average total cost is $15 at the profit-maximizing quantity, then the firm's maximum profit is
$36
Refer to Figure 16-1. If the average variable cost is $13 at the profit-maximizing quantity, and if the firm's profit is $20 at that quantity, then its fixed costs amount to
$40
Refer to Figure 16-1. If the average variable cost is $12 at the profit-maximizing quantity, and if the firm's fixed costs amount to $30, then the firm's maximum profit is
$42
Refer to Figure 16-2. What price will the monopolistically competitive firm charge in this market?
$80
Refer to Figure 16-1. The firm's profit-maximizing level of output is
12 units
Refer to Figure 16-2. How much output will the monopolistically competitive firm produce in this situation?
20 units
A monopolistically competitive firm faces the following demand schedule for its product: (table) The firm has total fixed costs of $20 and a constant marginal cost of $2 per unit. The firm will maximize profit with
9 units of output
In the short run, a firm operating in a monopolistically competitive market can earn
All of the above are possible (positive economic profits, economic losses and zero economic profits)
Refer to Figure 16-2. Which of the following will occur in the long run in this industry?
Firms will enter this industry
Refer to Figure 16-1. If the ATC=20 at the profit-maximizing level of output, which of the following will occur in the long run in this industry?
Firms will exit this industry
Which of the following conditions is characteristic of a monopolistically competitive firm in both the short-run and the long run?
P > MC
Refer to Figure 16-1. Suppose that average total cost is $18 when Q=12. What is the profit-maximizing price and resulting profit?
P=$18, profit=$0
Refer to Figure 16-2. What is the profit-maximizing price, quantity, and resulting profit?
P=$80, Q=20 units, profit=$200
Which of the following is not a key feature of monopolistic competition?
Positive economic profits for firms in the long run
Some firms have an incentive to advertise because they sell a
differentiated product and charge a price above marginal cost
Refer to Figure 16-1. Suppose ATC = $18 when Q = 12. Then the
firm is in a long-run equilibrium when it produces 12 units of output
Which of the following is not a characteristic of monopolistic competition?
firms are price takers
Refer to Figure 16-2. This firm is operating
in the short run and earning a positive economic profit
A monopolistically competitive industry is characterized by
many firms, differentiated products, and free entry
To maximize its profit, a monopolistically competitive firm chooses its level of output by looking for the level of output at which
marginal revenue equals marginal cost
A market structure in which there are many firms selling products that are similar but not identical is known as
monopolistic competition
A profit-maximizing firm in a monopolistically competitive market is characterized by which of the following?
price exceeds marginal cost
Refer to Figure 16-1. Suppose you were to add the ATC curve to the diagram to show the firm in a situation of long-run equilibrium. You would draw the ATC curve
tangent to the demand curve at the point (Q = 12, P = $18)
