Microeconomics Chapter 13

Refer to the diagram for a monopolistically competitive firm in short-run equilibrium. This firm's profit-maximizing price will be

$16

Monopolistic competition is characterized by excess capacity because

firms produce at an output level less than the least-cost output.

A significant difference between a monopolistically competitive firm and a purely competitive firm is that the

former sells similar, although not identical, products.

Industries X and Y both have four-firm concentration ratios of 32 percent, but the Herfindahl index for X is 256, while that for Y is 264. These data suggest

greater market power in Y than in X.

In the long run, economic theory predicts that a monopolistically competitive firm will

have excess production capacity.

Answer the question on the basis of the following demand and cost data for a specific firm. Demand DataCost Data(1) Price(2) QuantityTotal OutputTotal Cost$5022$45453355404470355590306611525771452088180 In the long run, the number of firms in this monopolistic competitive industry will most likely

increase.

A monopolistically competitive firm's marginal revenue curve

is downsloping and lies below the demand curve.

Refer to the diagram. The monopolistically competitive firm shown

is realizing an economic profit.

The stronger the product differentiation in monopolistic competition, the

less elastic the demand curve, and production will take place further to the left of minimum average costs.

(Last Word) Raising the minimum wage in the restaurant industry

makes it more difficult for mom and pop restaurants to compete with highly capitalized chain restaurants.

Refer to the diagram for a monopolistically competitive firm in short-run equilibrium. This firm will realize an economic

profit of $480.

FirmMarket Share (%)A40B30C20D5E5 Refer to the data. If Firm B merged with Firm C, the industry's four-firm concentration ratio would ____ and its Herfindahl index would ____.

rise; rise

In the long run, the economic profits for a monopolistically competitive firm will be

the same as the profits for a purely competitive firm.

Which industry would be best characterized as monopolistically competitive?

web design consulting

The graph depicts a monopolistically competitive firm. This monopolistically competitive firm is earning economic profits in the short run and

will earn only normal profits in the long run.

Refer to the diagram for a monopolistically competitive producer. This firm is experiencing

excess capacity of DE.

Assume the top six firms comprising an industry have market shares of 10, 8, 8, 5, 5, and 4 percent. The remaining 20 firms each have market shares of 2 percent. The Herfindahl index for this industry is

374.

Assume that the short-run cost and demand data given in the tables below confront a monopolistic competitor selling a given product and engaged in a given amount of product promotion. Cost DataDemand DataTotal OutputTotal CostQuantity DemandedPrice0$250$601401552452503553454704405905356115630 What output and price levels will maximize the firm's profit in the short run?

4 units and $40

Answer the question on the basis of the following demand and cost data for a specific firm. Demand DataCost Data(1) Price(2) Price(3) QuantityTotal OutputTotal Cost$50$3522$4545303355402544703520559030156611525107714520588180 If columns 1 and 3 are this firm's demand schedule, the profit-maximizing level of output will be

4 units.

Answer the question on the basis of the following demand and cost data for a specific firm. Demand DataCost Data(1) Price(2) Price(3) QuantityOutputTotal Cost$11.00$10.0066$619.998.8577629.008.0088648.007.0099677.106.101010726.005.001111795.154.15121286 If columns (1) and (3) of the demand data shown are this firm's demand schedule, the profit-maximizing level of output will be

8 units.

Refer to the above graphs. A short-run equilibrium that would produce profits for a monopolistically competitive firm would be represented by graph

A.

Refer to the diagram for a monopolistically competitive firm. Long-run equilibrium price will be

A.

Refer to the above graphs. The long-run equilibrium for a monopolistically competitive firm is represented by graph

B.

Refer to the above graphs. A short-run equilibrium that would result in losses for a monopolistically competitive firm would be represented by graph

D.

In the long run, monopolistically competitive firms make normal profits because they are forced to operate at the minimum point on their average total cost curve.

False

Monopolistically competitive firms exist due to high barriers to entry.

False

The entry of more firms into a monopolistically competitive market tends to increase the excess capacity of firms in the industry in the long run.

False

The Herfindahl index is a measure of the degree of product differentiation in an industry.

False.

Which of the following statements is not true for a monopolistically competitive industry?

Firms operate at the lowest point of their ATC curves in the long run.

When a monopolistically competitive firm is in long-run equilibrium,

MR = MC and minimum ATC > P.

Which of the following statements is correct?

There is a trade-off between product variety and allocative efficiency.

That one thing that monopolistic competition provides, which is not assured in the other market structures, is product variety.

True

The excess capacity problem associated with monopolistic competition implies that fewer firms could produce the same industry output at a lower total cost.

True

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

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

Monopolistic competition resembles pure competition because

barriers to entry are either weak or nonexistent.

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

decrease.

In long-run equilibrium, both purely competitive and monopolistically competitive firms will

equate marginal cost and marginal revenue.

Communist central planners didn't care about product differentiation, opting instead for a uniform design of products in order to achieve

mass production and lower costs.

Answer the question on the basis of the following demand and cost data for a specific firm. Demand DataCost Data(1) Price(2) Price(3) QuantityOutputTotal Cost$11.00$10.0066$619.998.8577629.008.0088648.007.0099677.106.101010726.005.001111795.154.15121286 Suppose that entry into this industry changes this firm's demand schedule from columns (1) and (3) to columns (2) and (3). We can conclude that this industry is

monopolistically competitive.

The demand curve of a monopolistically competitive producer is

more elastic than that of a pure monopolist, but less elastic than that of a pure competitor.