micro ch 8 questions

Which of the following is a difference between a purely competitive firm and a monopolistically competitive firm?

b. Average total cost at the profit-maximizing output in the long run is different for a monopolistically competitive firm, as compared to a purely competitive firm. For a purely competitive firm, average total cost is at its minimum point.

Some industry types are more efficient than others. In which of the following industries is the firm producing at the lowest average total cost in the long run? In other words, which industry produces at the minimum point on the average total cost curve (lowest ATC) in the long run

b. Pure competition.

Firm A does business over the Internet. It operates in an industry with approximately 200 other small and equally competing firms. The firms in this industry sell similar, yet slightly differentiated, products. Firm A is competing in:

b. a monopolistically competitive industry.

Firms in monopolistic competition:

b. differentiate; in other words, they sell products that are different from their competitors.

The demand curve of a typical firm in monopolistic competition is:

b. downward-sloping and more-elastic (less steep) than a monopolist's demand curve

If a firm in monopolistic competition makes an economic profit in the short run, new firms will want to enter. This:

b. increases supply in the market, lowers the market price, and eventually lowers the economic profit of the company to zero.

Most retail stores are:

b. monopolistically competitive firms.

There are significant barriers to enter a:

b. oligopoly industry.

The main reason that firms in oligopoly industries can earn above-normal economic profits is that:

b. there are barriers to entering an oligopoly industry.

Firms in most market structures advertise. Which of the following is true about advertising?

c. Advertising has a cost, but if it leads to economies of scale, total costs may come down and it may not lead to a higher price. Advertising can also be beneficial to the consumer, because it may provide the consumer with helpful information.

A firm in monopolistic competition maximizes profits at a price and quantity at which:

c. marginal cost equals marginal revenue, or where marginal cost comes closest to marginal revenue without being greater than marginal revenue. All this is contingent upon the conditions that the price is greater than the average variable cost and marginal cost must be rising.

Firms in monopolistic competition and oligopoly maximize profits at a quantity such that:

c. marginal cost equals or approaches marginal revenue in the upward-sloping part of the marginal cost curve, as long as the price is greater than the average variable cost.

In which type of industry can one reasonably expect the price of the product to be closest to the cost of production and at the minimum average total cost in the long run?

a. Pure competition.

What can we conclude about the long-run equilibrium price of a product that is made by firms in pure competition and monopolistic competition?

a. The equilibrium price is the same as the average total cost. c. The price is such that economic profits are zero.

The main difference between a purely competitive firm and a monopolistically competitive firm is that:

a. a purely competitive firm sells a product that is identical to competitors' products, whereas monopolistically competitive firms sell slightly differentiated products.

According to our CD (Bouman), total economic profits of any business in the long run will never be exorbitant (extremely high), as long as there is:

a. free and unrestricted competition.

Firms in monopolistic competition usually charge a price that is:

a. just enough to cover their economic cost of production; subsequently, they experience zero economic profits in the long run.

A monopolistically competitive firm's economic profits are:

a. typically zero in the long run.