BUSI620 WK4 HW
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
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 = dR/dQ
For a perfectly competitive firm, marginal revenue is equal to the market
price
When firms in monopolistic competition earn positive economic profits, other firms tend to the market.
enter
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
In a perfectly competitive market, the individual producer's demand curve is the market
price
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
3
When firms in monopolistic competition earn positive economic profits, how will additional firms react?
Additional firms enter and produce variations of the product.
Define the competitive firm's demand.
Df = P = MR
A monopolist's marginal revenue (MR) is given by:
MR = P(1 + E/E)
Suppose a market contains one supplier of a good that has no close, available substitutes. What type of market structure is this?
Monopoly
Which is a strategy firms use to tailor goods and services to meet the needs of a particular segment of the market?
Niche marketing
what happens in a perfectly competitive industry when firms earn profits?
Price falls Profits of remaining firms fall Supply increases
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.
In perfect competition, profit equals
Revenues - Costs
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
Since each producer in a perfectly competitive market has no influence on market price, the demand curve for the individual firm is
a horizontal line equal to the market price.
Suppose an organic salad shop attempts to increase demand for its food by differentiating itself as a healthy alternative to fast-food hamburgers. This is an example of advertising. (Enter one word in the blank)
comparative
The monopolist is restricted to price-quantity combinations that lie on the demand curve as a result of decisions made by
consumer
The welfare loss to society due to the level of output produced by a monopolist is called the loss of monopoly.
deadweight
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
The demand curve for a perfectly competitive firm is a _______ line at the market ____________. (Enter one word in each blank)
horizontal price
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.
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
Economies of scale and scope, cost complementarity, and patents are all sources__________ power.
monopoly
The market structure where a firm has a large degree of market power is called
monopoly
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.
π = P(Q) - C(Q) defines
profits
Marginal revenue is the __________ of the total revenue curve.
slope
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
What is the key difference in determining the profit-maximizing price and output under monopoly versus monopolistic competition?
there is no difference