smartbook chapter 13
When Mary tried to get an appointment with a local dentist she was told that the earliest the doctor could see her was in three weeks. This may have been due to a lack of ______. Multiple choice question.
excess capacity
The four-firm concentration ratio and the Herfindahl index measure ______.
industry concentration
Excess capacity is best described as underused plant resources that are a result of ______.
a firm producing less output than what is associated with achieving minimum average total cost
Entry of new firms into monopolistically competitive industries is relatively easy because ______.
capital requirements are low
When measuring industry concentration, the ____ is the ratio of sales of the four largest firms in an industry relative to total industry sales.
four-firm concentration ratio
The goal of advertising a product to differentiate it from competitor's products so that price is less of a factor when a consumer makes a purchase is considered ______ competition.
1000
Which of the following best exemplifies a firm with excess capacity?
A fast-food restaurant where customers never have to wait to place an order.
Which of the following is a characteristic of monopolistic competition?
Differentiated products
Why does each monopolistically competitive firm generally have limited control over market price?
Each firm has a relatively small percentage of the total market.
Why do firms engage in product differentiation if it adds to the firm's costs?
Increased differentiation may increase demand enough to compensate for the added costs.
What will happen to a monopolistically competitive firm in the long run?
It will only break even.
competition is a market characterized by having many sellers, differentiated products, and ease of entry and exit from an industry.
Monopolistic c
Which of the following factors is most likely to help a monopolistically competitive firm postpone earning only a normal profit?
Product differentiation
Which of the following represents the most significant benefits to society generated by monopolistically competitive markets?
Product differentiation
In the long run, a monopolistic competitor fails to achieve which of the following?
Productive efficiency Allocative efficiency
Andrea and Robert are considering operating a retail jewelry store. Robert has been designing jewelry for a wholesaler since graduating from college. Andrea was a business major and is evaluating if they can increase their income by being in business for themselves. Which of the following characteristics show that the industry they wish to enter is a monopolistically competitive industry? Multiple select question.
There are many places to buy jewelry. Opening a retail jewelry store is relatively easy.
A monopolistic competitor's demand curve is ______.
more elastic than that of a pure monopoly but less elastic than that of a firm in pure competition
The goal of advertising a product to differentiate it from competitor's products so that price is less of a factor when a consumer makes a purchase is considered ______ competition.
nonprice
The Herfindahl index equals ______.
the sum of the squared percentage market shares of all firms in an industry
The Herfindahl index equals the ______.
the sum of the squared percentage market shares of all firms in an industry sum of the squared percentage market shares of all firms in an industry
If the four largest firms in an industry produce 20, 10, 7, and 3 units of output, respectively, and total industry output is 100 units, then the four-firm concentration ratio equals ______.
40
Suppose an industry has two firms each with 50% market share. The Herfindahl index for this industry is ______.
5000
Suppose an industry has ten firms. Three of the firms produce 200 units of output each, one produces 150 units, two of the firms produce 75 units each, and four of the firms produce 25 units each. The four-firm concentration ratio for this industry equals ______. Multiple choice question.
75%
Suppose an industry has 10 firms and each has a 10% share of the market. This industry's Herfindahl index is
Blank 1: 1000
competition is competition illustrated through product differentiation and advertising.
Blank 1: Nonprice
A good way to describe (monopolistic/oligopolistic) competition is that it mixes a small amount of monopoly power with a large amount of competition, while (monopoly/oligopoly) blends a large amount of monopoly power with a small amount of competition through entry and considerable rivalry among firms.
Blank 1: monopolistic Blank 2: oligopoly or oligopolistic
The four-firm concentration ratio, expressed as a percentage, is the ratio of the total industry _ of the four largest firms in an industry relative to total industry sales.
Blank 1: sales, output, or production
Which of the following produce variations of a particular product?
Monopolistically competitive firms
Which of the following are typical characteristics of monopolistic competition?
No collusion Small market share Independent action
B-Balls, a manufacturer of athletic balls, is facing increased competition due to the entry of several new firms into the industry. These new competitors have resulted in reduced demand for B-Balls' basketballs, and the company is losing money. Which of the following steps should B-Balls take regarding price in order to minimize losses until some firms exit the industry? Multiple choice question.
Set its price at its new reduced level of demand where the MC curve intersects the MR curve
Which of the following scenarios does not illustrate the concept of product differentiation based on service?
Some stores may charge different prices.
Which of the following correctly describes the difference between products under pure competition versus products under monopolistic competition?
Standardized products are sold in pure competition, but differentiated products are sold in monopolistic competition.
B-Balls, a manufacturer of athletic balls, is facing increased competition due to the entry of several new firms into the industry. These new competitors have resulted in reduced demand for B-Balls' basketballs, and the company is losing money. What should B-Balls do in regard to output for their basketballs to help minimize losses until some firms exit the industry? Multiple choice question.
They should reduce output to wherever their new MR curve equals the MC curve caused by a leftward shift in demand.
A major trade-off that occurs in monopolistically competitive industries is that, as product differentiation increases,
excess capacity also increases.
The demand curve faced by a monopolistically competitive firm is _____.
highly but not perfectly elastic.
Monopolistic competition normally consists of 25 to 75 firms rather than hundreds or thousands and involves which of the following characteristics?
independent action small market shares no collusion
In the short run, monopolistically competitive firms maximize profits or minimize losses by producing the output level where
marginal revenue equals marginal cost.
Two types of market models that closely approximate many markets in the real world are
monopolistic competition and oligopoly.
Monopolistically competitive firms to engage in ______ competition by means of product differentiation and advertising, which makes the market situation complex.
nonprice
in long-run equilibrium, monopolistically competitive firms will show a(n) _____.
normal profit
Productive efficiency in monopolistically competitive markets does not occur in the long run because firms set the price
on the demand curve where MR=MC to maximize economic profit, making output less than optimal from society's perspective.
The equality of price and minimum average total cost yields efficiency; the equality of price and marginal cost yields efficiency.
productive allocative
When a firm's price is equal to its minimum average total cost of producing a product, ___ exists.
productive efficiency
When plant and equipment are underutilized because firms are producing less than the minimum-ATC output, this is known as having ______.
productive inefficiency excess capacity
Entry to and exit from monopolistically competitive industries is ______.
relatively easy
Monopolistically competitive firms typically have a(n) ______ share of the market.
relatively small
A firm with more courteous and helpful clerks than its rivals enables the firm to differentiate their good based on which of the following?
service
If a monopolistically competitive firm is producing where its marginal revenue is less than its marginal cost, then the firm
should produce less output to increase profits or reduce losses.
True or false: Concentration ratios that use national market share numbers are of limited help because they do not account for the fact that competition in many industries is concentrated in local markets.
t
Industry concentration measures the extent to which ______.
the largest firms account for industry output
In order for a monopolistically competitive firm to maximize profits, it must juggle which of the following factors?
the variety of product the selling price of the product the level of advertising