Economics Ch. 15

a monopolistically competitive firm maximized profit where

MR=MC

a monopolistically competitive firm can minimize its losses by producing where ______ as long as ______

MR=MC; P>or equal to AVC

we know that monopolistically competitive firms prevent the efficient use of resources because they produce where

P>MC

there is easy entry into the ______ and _______ industries

a perfectly competitive; monopolistically competitive

the feature that distinguishes monopolistic competition from perfect competition from perfect competition is that monopolistically competitive firms are

able to differentiate their products

critics of advertising contend all of the following EXCEPT

advertising can easily turn into productive competition that increases welfare

for a monopolistically competitive firm in long-run equilibrium,

at the profit-maximizing quantity, the demand curve must be tangent to the average total cost curve

monopolies can ear positive economic profits in the long run while monopolistically competitive firms cannot due to

barriers to entry in monopoly but not in monopolistic competition

in monopolistic competition, firms can have some market power

by producing differentiated products

the speciality cake store, a monopolistically competitive firm, is producing 200 decorated cakes per day and selling each cake for $17. at that production level ATC is $20, AVC is $15, and AFC is $5, and bother MR and MC are $8. this firm should

continue to produce 200 cakes, as price is grater than AVC

mama lena's, a frozen food producer, is a monopolistically competitive firm. mama lena's is currently selling frozen lasagna at a price of $10. mama lena's marginal cost is $5 and marginal revenue is $5. this firm should ______ to maximize profits in the short run

continue to produce the same output level

firms gain control over price in monopolistic competition by

differentiating their products

firms will ______ a monopolistically competitive market until ______ are eliminated

enter, profits

in a monopolistically competitive industry,

firms are small relative to the total market

the case AGAINST advertising includes the fact that

firms spend large sums of money to create artificial differences among products

if firms in a monopolistically competitive industry are incurring losses, in the long run

firms will leave this industry until the remaining firms are earning a NORMAL profit

product differentiation can be used by firms to do all of the following EXCEPT

gain complete control over the price of their product

unlike a monopolistic firm's product, a monopolistically competitive firm's product

has many close substitutes

product differentiation that makes the product better or some consumers and worse for others is

horizontal differentiation

product differentiation that makes the product better than a rival's product from everyone's perspective

is know as vertical differentiation

the case for advertising include the fact that

it provided consumers with valuable information about product availability, quality, and price

the case for product differentiation does NOT include the fact that

it waste society's scarce resources

compared to a perfectly competitive firm, the demand schedule of a monopolistically competitive firm faces is

less price elastic

monopolistically competitive firms in long-run equilibrium produce at _____ the optimal scale

less than

the pizza delivery industry is monopolistically competitive. little joe's pizzeria raises its prices by 10%, but all the other pizzerias in town keep their prices the same. which of the following is most likely to occur?

little joe's pizzeria will lose some of its customers

when MR=MC and P+ATC for a monopolistically competitive firm, the firm is in

long run equilibrium

a monopolistically competitive firm produces where

marginal revenue equals marginal cost

to maximize profit, a monopolistically competitive firm will produce where

marginal revenue equals marginal cost

In San Francisco there are many retail clothing stores. each store is slightly different from every other store. retail clothing stores are an example of what market structure?

monopolistic competition

monopolistic competitive differs from perfect competition primarily because in

monopolistic competition, firms can differentiate their products

a profit maximizing firm in a monopolistically competitive market structure shaves much like a _____ in the short run

monopolistic firm

the restaurant industry is an example of a(n) ________ industry

monopolistically competitive

which of the following features distinguishes monopolistically competitive firms from monopolies and oligopolies?

monopolistically competitive firms cannot influence market price by virtue of their size alone while monopolies and oligopolies can

the demand facing a monopolistically competitive firm is _____ a monopolistic firm and _____ a perfectly competitive firm

more elastic than; less elastic than

a monopolistically competitive firm

must lower price to sell more output

if ATC>P, the a profit maximizing, monopolistically competitive firm earns ____ economic profits

negative

in the long run monopolistic competition equilibrium, there can be

neither economic profits nor losses

if firms in a monopolistically competitive industry are earning economic profits, then in the long run

new firms producing close substitutes will enter the industry and this entry will continue until economic profits are eliminated

in long run equilibrium for a monopolistically competitive industry _____ firms earn ______ economic profits

no, positive or negative

a(n) _______ industry does NOT have price as a decision variable

perfectly competitively

if P>ATC, then a profit maximizing, monopolistically competitive firm earns ____ economic profits

positive

when monopolistically competitive firms earn _____ economic profits, other firms ______ an industry in the long run

positive, enter

monopolistically competitive firms prevent the efficient use of resources because in long-run equilibrium

price is greater than marginal cost

the speciality cake store, a monopolistically competitive firm, is producing 200 decorated cakes per day and selling each cake for $12. at that production level ATC is $20, AVC is $15, and AFC is $5, and bother MR and MC are $8. this firm should

produce zero cakes and just pay fixed costs

in order to achieve market power, monopolistically competitive firms use_______

product differentiation

monopolistically competitive firms use a(n) ______ strategy to achieve market power

product differentiation

compared to a perfectly competitive firm having the dame cost curves, a monopolistically competitive firm _____ output and _____ prices

reduces, raises

a monopolistically competitive firm that is incurring a loss will shut down if

revenues are less than variable costs

a monopolistically competitive industry has all of the following characteristics EXCEPT

strategic behavior

the internet has had a significant influence on advertising in all of the following ways EXCEPT

the internet has reduced the level of transparency of informational advertising

a monopolistically competitive firm that is incurring a loss will produce in the short run as long as the revenue the firm receives is sufficient to cover

variable costs