Microeconomic Exam 3 Monopoly

Variety

A clear benefit to monopolistic competition for consumers is product

Cost; Revenue

A monopolistically competitive firm should product output until the marginal ____ equals the marginal ________

Neither industry has significant barriers to entry

A monopolistically competitive industry is like a purely competitive industry in that

Return to the position where normal profits are generated (zero economic profit)

After the entry of new firms, the new demand and marginal revenue curves for the firm will

Marginal benefit = Marginal Cost

Allocative efficiency occurs when

Attract other firms to enter the industry, causing the existing firms' profits to shrink

Assume that in a monopolistically competitive industry, firms are earning economic profit. This situation will

Monopolistically; Demand

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

Different; Price

Because the products of a monopolistically competitive firms are _________ from other companies in their industry; these firms are able to have some control over the _____ of their products

Different; Downward

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

Productive inefficiency

Excess capacity implies

Consumers

For monopolistically competitive firms, branding serves as a signal to _________ about the products they are going to purchase

In the long run, other firms will enter the market

If a firm begins in long-run equilibrium, generating normal profit, then

Decrease

If monopolistically competitive firms in an industry are making an economic profit, then new firms will enter the industry and the product demand facing existing firms will

Normal profit

If profit = 0, the firm generates a

Loss

If profit is < 0, the firm generates a

Economic profit

If profit is > 0, the firm generates an

Monopolistic

In a _________ competitive market, consumers can usually find exactly what they are looking for based on their preferences and budgets

Earning a normal profit, but not a economic profit

In the long run, a representative firm in a monopolistically competitive industry will end up

Retail trade

In which industry is monopolistic competition most likely to be found?

Not the same market structure

Monopolistic competition and a monopoly are

Entry; Exit

Monopolistic competition and perfect competition have one main characteristic in common: relatively easy market ____ and ____

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 a relatively easy market entry and exit

Monopolistic competition is a market characterized by:

Firms produce at an output level less than the least-cost output

Monopolistic competition is characterized by excess capacity because

producing differentiated products

Monopolistic competition is characterized by firms

Combine characteristics of competitive markets and characteristics of pure monopolies

Monopolistically competitive markets:

Will be higher than the original

Once the demand for this firm's product increases, the new profit-maximizing level of output and price for the firm

Monopolistically; Consumers

One common feature of ____________ competitive markets is that firms invest heavily in product development and innovation, which benefits _________ greatly.

there is some control over price in monopolistic competition

One difference between monopolistic and pure competition is that

Large number of buyers and sellers Easy entry and exit Producers who are price takers Standardized products

Perfect Competition

Productive efficiency

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

allocative efficiency

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

Total Revenue-Total Cost

Profit=

Shift to the right

Suppose there is a large increase in demand in the overall market, resulting in an increase in a demand for this firms product. The demand and the marginal revenue curves will

Substitutions; Price

The availability of close __________ in monopolistically competitive markets allows consumers to be more responsive to _____ changes

Reflects some level of control over its own price

The downward sloping demand curve of a monopolistic competitor

Price less of a factor and product differences more of a factor in consumer purchases

The goal of product differentiation and advertising in monopolistic competition is to make

Is not productively efficient in the long run

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:

Deadweight

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

Quantity of output; Price; Average total cost

To calculate profit, which three pieces of information must be identified?

Economic

Total revenue minus implicit and explicit cost of production is _____ profit

Output is produced at the lowest possible total cost per unit; Output is produced using the fewest resources possible to produce a good or service

When is there productive efficiency:

Relatively easy entry

Which of the following is a characteristic of monopolistic competition?

Easy entry Many firms Differentiated products

Which set of characteristics below best describes the basic features of monopolistic competition

Economic Profit

With an increase in demand, the firm will generate an

Allocative

________ efficiency os producing the goods and services that consumers most want in such a way that the marginal benefit equals the marginal cost