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