module 12 study set - Custom Scholars
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module 12 study set

question
monopolistic competition
answer
like perfect competition, a monoplististically competitive industry is an industry in which enry and exit is easy and many firms are the norm. in contrast a perfectly competitive frim each firm produces a slighly diffrent version of a product these give rise to some market power. A monoplistically competitive industry can charge higher prices than their competitor and not lose any customers
question
Monopolistic Competition Characteristics
answer
large number of firms in market, firms provide differentiated products, firms are able to easily enter or exit the market
question
competition among sellers
answer
entry by more producers reduces the quantity each existing producer sells
question
value diversity
answer
consumers gain from the increased diversity of products
question
profit maximization
answer
-produce quanity (q1) at which MR=MC
-monopoly firms set price (p1) according to demand
question
short run profit loss
answer
one can easily enter or exit the market
-new entrants mean fewer customers for the original firms:D and MR shift left
- new demand curve is flatter, representing the more elastic demand as a result of more competition
question
long run equilibrium
answer
the process of entry or exit is complete - remaining firms earn zero economic profit
question
advertisting
answer
when a firm advertises a product, it is trying to shift the DC for the product to the right and make it more inelastic. if the firm is sucessful it will sell more of the product at every price and able to increase price it charges without losing as many customers
- advertising also increase firms costs
- if the increase in revenue that results from advertising is greater than increase in costs, the firms profits will rise.
question
Which of the following is never true when monopolistic competition arises in a specific market? a) each firm has a differentiated product.
answer
the firms take prices as given.
question
Perfect competition and monopolistic competition are similar in that both market structures include:
answer
no barriers to entry
question
Abby operates a small deli downtown. The deli industry is monopolistically competitive. In the long run, Abby will produce where:
answer
marginal revenue equals marginal cost.
question
Which of the following is TRUE of firms in both perfect competition and monopolistic competition?
answer
Long-run economic profits are equal to zero.
question
Below are drawn cost curves for a monopolistically competitive firm. What is the profit?
answer
Profit = (P - ATC)q = (16-12)20=80
question
In response to the situation represented by the figure, as we move to the long run equilibrium, we would expect:
answer
-some of the firms that are currently in the market to exit.
- the demand for this firm's product to increase, assuming this firm does not exit.
-this firm's profit to move from its current value toward zero.
question
the demand schedule of a monopolistically competitive firm when compared to the demand schedule of a perfectly competitive firm is
answer
less price elastic.
question
The demand facing a monopolistically competitive firm is ________ a perfectly competitive firm and ________ a monopolistic firm.
answer
less elastic than; more elastic than
question
A significant difference between perfect competition and monopolistic competition is that a) a perfectly competitive firm is a price searcher, while a monopolistic competitive firm is a price taker.
answer
a perfectly competitive firm sells a homogeneous product, while a monopolistic competitive firm sells a differentiated product.
question
The number of sellers in a perfectly competitive market is ___________, the number of sellers in a monopolistic competitive market is ____________, and the number of sellers in an oligopoly is
answer
many; many; few
question
There ___________ barriers to entry in a perfectly competitive market. There ____________ barriers to entry in monopolistic competition. There ____________ barriers to entry in oligopoly. There ____________ barriers to entry in monopoly.
answer
are no; are no; are; are
question
When ________ for a monopolistically competitive firm, the firm is in long-run equilibrium.
answer
MR = MC and P = ATC
question
The relationship between a monopolistic competitive firm's marginal revenue curve and its demand curve is that the
answer
marginal revenue curve lies below the demand curve and both are downward sloping.
question
Generally, the monopolistic competitor is in long run equilibrium when
answer
MR = MC and P = ATC.
question
A significant difference between perfect competition and monopolistic competition is that:
answer
a perfectly competitive firm sells a homogeneous product, while a monopolistic competitive firm sells a differentiated product.
question
Which of the following statements is true about monopolistically competitive firms?
answer
Unlike perfectly competitive firms, monopolistically competitive firms are able to raise their prices without losing all of their customers.
question
Which of the following is not a characteristic of a monopolistically competitive firm in long-run equilibrium?
answer
Price is equal to marginal cost.
question
Which of the following is not a characteristic of oligopoly?
answer
There are few buyers.
question
Larson's Italian Ice is a monopolistically competitive firm. If Larson's is losing money in the short run, which of the following is most likely to occur?
answer
Losing money so some existing firms will be leaving the market, causing the demand for Larson's to increase (shift to the right).
question
which of the following is NEVER true when monopolistic competition arises in a specific market?
answer
the firm takes price as given
question
A profit maximizing firm in a monopolistic competitive market behaves much like a ___________ in the short run. Unlike a monopolistic firms product, a monopolistically competitive firms product __________. Compared to a perfectly competitive firm, the demand schedule a monopolistically competitive firm faces is _____________.
answer
monopolist, new close substitutes, less price elastic
question
If firms in a monopolistically competitive industry are making profits, in the short run__________.
answer
new firms will enter the market
1 of 30
question
monopolistic competition
answer
like perfect competition, a monoplististically competitive industry is an industry in which enry and exit is easy and many firms are the norm. in contrast a perfectly competitive frim each firm produces a slighly diffrent version of a product these give rise to some market power. A monoplistically competitive industry can charge higher prices than their competitor and not lose any customers
question
Monopolistic Competition Characteristics
answer
large number of firms in market, firms provide differentiated products, firms are able to easily enter or exit the market
question
competition among sellers
answer
entry by more producers reduces the quantity each existing producer sells
question
value diversity
answer
consumers gain from the increased diversity of products
question
profit maximization
answer
-produce quanity (q1) at which MR=MC
-monopoly firms set price (p1) according to demand
question
short run profit loss
answer
one can easily enter or exit the market
-new entrants mean fewer customers for the original firms:D and MR shift left
- new demand curve is flatter, representing the more elastic demand as a result of more competition
question
long run equilibrium
answer
the process of entry or exit is complete - remaining firms earn zero economic profit
question
advertisting
answer
when a firm advertises a product, it is trying to shift the DC for the product to the right and make it more inelastic. if the firm is sucessful it will sell more of the product at every price and able to increase price it charges without losing as many customers
- advertising also increase firms costs
- if the increase in revenue that results from advertising is greater than increase in costs, the firms profits will rise.
question
Which of the following is never true when monopolistic competition arises in a specific market? a) each firm has a differentiated product.
answer
the firms take prices as given.
question
Perfect competition and monopolistic competition are similar in that both market structures include:
answer
no barriers to entry
question
Abby operates a small deli downtown. The deli industry is monopolistically competitive. In the long run, Abby will produce where:
answer
marginal revenue equals marginal cost.
question
Which of the following is TRUE of firms in both perfect competition and monopolistic competition?
answer
Long-run economic profits are equal to zero.
question
Below are drawn cost curves for a monopolistically competitive firm. What is the profit?
answer
Profit = (P - ATC)q = (16-12)20=80
question
In response to the situation represented by the figure, as we move to the long run equilibrium, we would expect:
answer
-some of the firms that are currently in the market to exit.
- the demand for this firm's product to increase, assuming this firm does not exit.
-this firm's profit to move from its current value toward zero.
question
the demand schedule of a monopolistically competitive firm when compared to the demand schedule of a perfectly competitive firm is
answer
less price elastic.
question
The demand facing a monopolistically competitive firm is ________ a perfectly competitive firm and ________ a monopolistic firm.
answer
less elastic than; more elastic than
question
A significant difference between perfect competition and monopolistic competition is that a) a perfectly competitive firm is a price searcher, while a monopolistic competitive firm is a price taker.
answer
a perfectly competitive firm sells a homogeneous product, while a monopolistic competitive firm sells a differentiated product.
question
The number of sellers in a perfectly competitive market is ___________, the number of sellers in a monopolistic competitive market is ____________, and the number of sellers in an oligopoly is
answer
many; many; few
question
There ___________ barriers to entry in a perfectly competitive market. There ____________ barriers to entry in monopolistic competition. There ____________ barriers to entry in oligopoly. There ____________ barriers to entry in monopoly.
answer
are no; are no; are; are
question
When ________ for a monopolistically competitive firm, the firm is in long-run equilibrium.
answer
MR = MC and P = ATC
question
The relationship between a monopolistic competitive firm's marginal revenue curve and its demand curve is that the
answer
marginal revenue curve lies below the demand curve and both are downward sloping.
question
Generally, the monopolistic competitor is in long run equilibrium when
answer
MR = MC and P = ATC.
question
A significant difference between perfect competition and monopolistic competition is that:
answer
a perfectly competitive firm sells a homogeneous product, while a monopolistic competitive firm sells a differentiated product.
question
Which of the following statements is true about monopolistically competitive firms?
answer
Unlike perfectly competitive firms, monopolistically competitive firms are able to raise their prices without losing all of their customers.
question
Which of the following is not a characteristic of a monopolistically competitive firm in long-run equilibrium?
answer
Price is equal to marginal cost.
question
Which of the following is not a characteristic of oligopoly?
answer
There are few buyers.
question
Larson's Italian Ice is a monopolistically competitive firm. If Larson's is losing money in the short run, which of the following is most likely to occur?
answer
Losing money so some existing firms will be leaving the market, causing the demand for Larson's to increase (shift to the right).
question
which of the following is NEVER true when monopolistic competition arises in a specific market?
answer
the firm takes price as given
question
A profit maximizing firm in a monopolistic competitive market behaves much like a ___________ in the short run. Unlike a monopolistic firms product, a monopolistically competitive firms product __________. Compared to a perfectly competitive firm, the demand schedule a monopolistically competitive firm faces is _____________.
answer
monopolist, new close substitutes, less price elastic
question
If firms in a monopolistically competitive industry are making profits, in the short run__________.
answer
new firms will enter the market
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