BUSI620 Chapter 8
A firm in monopolistic competition faces a demand curve with own-price elasticity equal to -2 and an advertising elasticity equal to 0.2.This firm should devote % of its revenues to advertising.
10
When firms in monopolistic competition earn positive economic profits, how will additional firms react?
Additional firms enter and produce variations of the product.
A firm in monopolistic competition faces a demand curve with own-price elasticity equal to -5 and an advertising elasticity equal to 0.15.This firm should devote % of its revenues to advertising.
Blank 1: 3 or three
The monopolist is restricted to price-quantity combinations that lie on the demand curve as a result of decisions made by
Blank 1: consumers, customers, or buyers
The welfare loss to society due to the level of output produced by a monopolist is called the
Blank 1: deadweight , dead weight, or dead-weight
When firms in monopolistic competition earn positive economic profits, other firms tend to
Blank 1: enter or join
The demand curve for a perfectly competitive firm is a line at the market .
Blank 1: horizontal or flat Blank 2: price
The market structure where a firm has a large degree of market power is called
Blank 1: monopoly
Economies of scale and scope, cost complementarity, and patents are all sources of (one word) power.
Blank 1: monopoly or monopolistic
For a perfectly competitive firm, marginal revenue is equal to the market
Blank 1: price
In a perfectly competitive market, the individual producer's demand curve is the market
Blank 1: price
On a graph, profits are given by the vertical distance between the cost function and the
Blank 1: revenue
A period of time during which at least one input is fixed is called the
Blank 1: short
Marginal revenue is the of the total revenue curve.
Blank 1: slope or derivative
Define the competitive firm's demand.
Df = P = MR
Which of the following is NOT a source of monopoly power?
Free entry and exit
A monopolist's linear inverse demand curve is P(Q) = 750 - 3Q. Which of the following is the monopolist's marginal revenue?
MR = 750 - 6Q
Given a revenue function: R(Q) = P(Q)Q The monopolist's marginal revenue (MR) is given by
MR = P(1+EE)1+EE MR = dPdQdPdQQ + P MR = dRdQ
What is the marginal revenue (MR) of the inverse linear demand function, P(Q) = a + bQ?
MR = a + 2bQ
Given a revenue function, R = R(Q), what is the marginal revenue (MR)?
MR = dRdQ
Suppose a market contains one supplier of a good that has no close, available substitutes. What type of market structure is this?
Monopoly
What does the free entry and exit assumption imply for a perfectly competitive market?
New firms will leave if they incur losses. New firms will enter when profits exist. In the long run, economic profits are zero.
Which is a strategy firms use to tailor goods and services to meet the needs of a particular segment of the market?
Niche marketing
As firms exit a perfectly competitive industry in the long run, what happens to the profits of the remaining firms?
Profits increase due to increased market price.
What happens to the industry supply as firms exit a perfectly competitive industry in the long run?
Supply decreases
What is the key difference in determining the profit-maximizing price and output under monopoly versus monopolistic competition?
There is no difference.
If MR is less than MC, a profit-maximizing monopolist should:
decrease output to maximize profits
For a monopolist, it is necessary to _______ price to increase output by one unit. As a result, the price received from all previous units _________
decrease; decreases
In order to maximize profits, a monopolist should produce where marginal revenue is ________ marginal cost.
equal to
A monopolist charges a ________ price and produces ________ output than a perfectly competitive industry.
higher; less
If MR is greater than MC, a profit-maximizing monopolist should ___.
increase output to maximize profits
When a monopolist increases output by one unit, total revenue
increases by less than price.
In monopolistic competition, each firm uses the ___________ demand curve and the marginal revenue curve to establish output and price. In monopoly, the firm uses the __________ demand curve and the marginal revenue curve to establish output and price.
individual; market
A monopolist faces a downward-sloping demand curve. As a result,
it can choose a price or a quantity, but not both.
For a monopolist, the marginal revenue curve has twice the slope of the demand curve. This implies
marginal revenue is less than price.
When many buyers and sellers freely enter and exit a market having similar, yet differentiated products, it is called ___
monopolistic competition
Fast-food hamburgers are characterized by a large group of sellers producing slightly different goods. What type of market is this?
monopolistically competitive
In order to maximize profits in the short run, a manager must determine how much output should be produced, given
only variable inputs within his or her control.
A market with many "small" buyers and sellers, identical products, no transaction costs, and free entry and exit where buyers and sellers have perfect information is called __________.
perfect competition
π = P(Q) - C(Q) defines
profits
Marginal revenue is
the change in total revenue from a one-unit change in output.
The price an individual producer in a perfectly competitive market faces is determined by:
the market supply and market demand
The demand curve faced by a monopolist is
the same as the market demand curve.
If consumers are willing to pay more for "Roper's Rice" than they are for "Rice by Russell", then "Roper's Rice" is enjoying additional value due to ______
brand equity