Micro Economics Chapter

The revenue and cost data for a hotel in a monopolistically competitive industry is shown in the table. The profit-maximizing price is:

$80.

Shani's Frozen Treats is one of 15 ice cream shops on the boardwalk. If Shani sells ice cream for $5 and sells 100 per day, how much economic profit will she earn in the long run?

0 as there are 15 firms which means there is high competition which would mean no possibility of economic profit in long run.

Which of the following is not a characteristic of a monopolistically competitive market? a) There are many firms competing in the market. b) Each firm takes the price as given in the market. c) Firms differentiate their products from other firms. d) Firms can earn economic profits in the short run

Each firm takes the price as given in the market. The monopolistic competitive firms produce unique products and establish a partial control over the price. The extent to which the firms control price depends on how strongly the buyers are attached to brand.Hence we can conclude that firms in a monopolistically competitive market are not price takers.

Which of the following industries is likely to be monopolistically competitive?

Fast food

Which of the following is true for a monopolistically competitive firm in the long run?

P = ATC A monopolistically competitive firm earns zero economic profit in the long run, which means price will equal its average total cost. It produces where marginal cost equals marginal revenue, the price is equal to average total cost, and the price is greater than marginal cost.

How would a firm in the monopolistically competitive T-shirt industry view its pricing decisions?

The firm would choose a price in recognition of the fact that there are many close substitutes for its product.

Scotty's Dry Cleaners is one of many dry cleaners in town. Which of the following characteristics of Scotty's would not be considered a strategy to differentiate its service?

To differentiate one's product, a business must offer some type of unique service to distinguish itself from its competition. To differentiate one's product, a business must offer some type of unique service to distinguish itself from its competition.

In monopolistically competitive industries, the key to market power has to do with _____.

differences in consumers' preferences

Firms in both monopolistic competition and monopoly face _____ demand curves.

downward-sloping

Brand names indicate that the seller:

has hopes to engage in repeated transactions with its customers.

Product differentiation is the source of market power for monopolistically competitive firms, such as: Please choose the correct answer from the following choices, and then select the submit answer button. Answer choices corn farming. hotels. automobile manufacturing. local water company.

hotels.

The revenue and cost data for a convenience store in a monopolistically competitive industry is shown in the figure. The firm is:

incurring a loss.

A beachfront four-star 90-room hotel consistently has more bookings than a four-star 90-room hotel that is six miles inland. The difference between the hotels is caused by differentiation by:

location.

In what type of industry are fashion trends most likely to arise?

monopolistic competition

A long-run equilibrium in a monopolistically competitive industry is inefficient because:

price is greater than marginal cost.

Maria Sharapova, a woman's tennis champion, stars in Canon Sure Shot commercials with her Pomeranian dog. This is an example of advertising that:

provides an indirect signal of a product's quality.

When Shaquille O'Neal stars in Icy Hot commercials, this is an example of advertising that:

provides an indirect signal of the product's quality.

Which of the following industries is MOST likely to be monopolistically competitive?

shampoo

Suppose that at the profit maximizing level of output for a monopolistically competitive firm, the price of a good is $10, and the average total cost is $8. Based on this information, the firm is operating in the _____, and we can expect _____.

short run; firms to enter the market If price is greater than the average total cost at any quantitiy there will be positive economic profit in the short-run. Therefore positive economic profit will attract the more firms for entering into the industry. In the long-run monopolistic firm earn zero economic profit while in short-run it may earn economic profit or economic loss

In the short run, if a monopolistically competitive firm in the fashion industry has an average total cost curve that lies above the demand curve, then the firm is:

taking a loss.

On a graph of long-run equilibrium for monopolistic competition, price is greater than marginal cost and a quantity _____ the minimum cost output level is produced.

to the left of

Which of the following is most likely a monopolistically competitive market?

Blue jeans Monopolistic or imperfect competition can be defined as a market where there is perfect competition but there is also the presence of a large variety which would allow the differentiation in the product ranges.

In a long-run equilibrium in a monopolistically competitive industry, price is equal to _____.

average total cost

A name owned by a particular firm that distinguishes its products from those of other firms is a:

brand name.