Question 1

Consider a monopolistically competitive firm in a market in long-run equilibrium.This firm is likely earning

Accepted Answer

In long-run equilibrium of a monopolistically competitive market, firms are earning only normal profit, which means they are covering all their costs including opportunity cost of resources. This implies that firms are charging a price equal to their average total cost, which makes the answer D the correct one.

Question 2

Figure 16-7
The lines in the figures below illustrate the potential effect of entry and exit in a monopolistically competitive market on either the demand curve or the marginal cost curve of existing firms. 
-Refer to Figure 16-7.Which of the diagrams illustrates the impact of some existing firms leaving the market?

Accepted Answer

The answer of Figure 16-7
The lines in the figures below...

Question 3

A monopolistically competitive firm faces the following demand curve for its product:  The firm has total fixed costs of $40 and a constant marginal cost of $2 per unit.We can conclude that

Accepted Answer

The answer of A monopolistically competitive firm faces the following...

Question 4

In a long-run equilibrium,

Accepted Answer

In a long-run equilibrium, only a perfectly competitive firm operates at its efficient scale, where price equals marginal cost, ensuring no economic profits and efficient scale of production. Monopolistically competitive firms, due to product differentiation and market power, typically do not operate at their efficient scale and often charge a markup over marginal cost.

Question 5

A firm has the following cost structure:  If this firm is in a typical monopolistically competitive market,in the long run it will likely produce

Accepted Answer

The answer of A firm has the following cost structure:...

Question 6

When a monopolistically competitive firm is in long-run equilibrium,

Accepted Answer

The answer of When a monopolistically competitive firm is in...

Question 7

A firm has the following cost structure:  If this firm is in a typical perfectly competitive market,in the long run it will likely produce

Accepted Answer

The answer of A firm has the following cost structure:...

Question 8

In the long run,

Accepted Answer

The answer of In the long run,
...

Question 9

Table 16-4
This table shows the demand schedule,marginal cost,and average total cost for a monopolistically competitive firm.
 
-Refer to Table 16-4.What is this firm's profit maximizing level of output?

Accepted Answer

The profit maximizing level of output occurs where marginal revenue equals marginal cost. From the table, we can see that the marginal revenue for each unit of output sold is $16. At 2 units of output, the marginal cost is $15, which is equal to the marginal revenue. Therefore, the firm's profit maximizing level of output is 2 units of output. At this level of output, the price charged will be $18 and the firm will earn a profit of $6 ($18 - $12 average total cost).

Question 10

Suppose for some firm that average total cost is minimized at Q₁ units of output.For a monopolistically competitive firm in long-run equilibrium,Q₁

Accepted Answer

The answer of Suppose for some firm that average total...

Question 11

Which of the following statements regarding monopolistic competition is not correct?

Accepted Answer

In the long-run equilibrium, firms in monopolistic competition produce a quantity that is less than their efficient scale, not in excess of it. This is because they have some degree of market power and can charge a price above marginal cost, which reduces their output compared to perfect competition.

Question 12

Entry and exit drive each firm in a monopolistically competitive market to a point of tangency between its

Accepted Answer

In a monopolistically competitive market, firms will produce where marginal revenue equals marginal cost in the short run. However, in the long run, firms will enter or exit the market depending on whether they are making profits or incurring losses. This will push prices towards the point of tangency between the firm's demand curve and its average total cost curve, as this is where the firm earns zero economic profit. Therefore, the firm will produce at a level where it can cover its average total cost but will not be able to earn significant economic profits.

Question 13

Figure 16-7
The lines in the figures below illustrate the potential effect of entry and exit in a monopolistically competitive market on either the demand curve or the marginal cost curve of existing firms. 
-Refer to Figure 16-7.Panel (d)illustrates the change that would occur if existing firms faced

Accepted Answer

The answer of Figure 16-7
The lines in the figures below...

Question 14

Table 16-4
This table shows the demand schedule,marginal cost,and average total cost for a monopolistically competitive firm.
 
-Refer to Table 16-4.At the profit maximizing level of output,what is this firm's total cost?

Accepted Answer

To find the profit-maximizing level of output, we look for where the marginal revenue (MR) equals marginal cost (MC). In this case, at a quantity of 5, MR=$20 and MC=$20. 
To find total cost at this output level, we look at the average total cost (ATC) column, which is $4. 
Total cost = ATC x quantity = $4 x 5 = $20. Therefore, the answer is choice C.

Question 15

Table 16-4
This table shows the demand schedule,marginal cost,and average total cost for a monopolistically competitive firm.
 
-Refer to Table 16-4.What price will this firm charge to maximize profit?

Accepted Answer

To maximize profit, a firm in monopolistic competition should produce where marginal revenue equals marginal cost. In this case, at a price of $8, the firm will produce a quantity of 6, where marginal revenue (MR) is equal to marginal cost (MC). At any price above or below $8, the firm will not be maximizing profit as MR will either be less than or greater than MC. Therefore, the firm should charge a price of $8 to maximize its profit.

Question 16

Which of these types of firms can earn a positive economic profit in the long run?

Accepted Answer

The answer of Which of these types of firms can...

Question 17

Suppose the point of tangency that characterizes long-run equilibrium for a monopolistically competitive firm occurs at Q₁ units of output.This level of output,Q₁,

Accepted Answer

In long-run equilibrium for a monopolistically competitive firm, output is where price equals marginal cost (P=MC) and the firm is producing at the minimum point on the average total cost curve (where ATC is tangent to the demand curve). Therefore, output Q₁ falls short of the level of output at which price equals marginal cost, indicating that the firm is charging a markup over its marginal cost.

Question 18

A monopolistically competitive firm is currently earning a positive economic profit.If other firms enter the market,we would expect that the added competition will cause this firm to adjust its output such that it

Accepted Answer

The answer of A monopolistically competitive firm is currently earning...

Question 19

"In a long-run equilibrium,price is equal to average total cost." This statement applies to

Accepted Answer

The answer of "In a long-run equilibrium,price is equal to...

Question 20

Joe's Juice Shop operates in a monopolistically competitive market.Joe's is currently producing where its average total cost is minimized.In the long run we would expect Joe's output to

Accepted Answer

The answer of Joe's Juice Shop operates in a monopolistically...

Quiz 16: Monopolistic Competition

Consider a monopolistically competitive firm in a market in long-run equilibrium.This firm is likely earning

A monopolistically competitive firm faces the following demand curve for its product: The firm has total fixed costs of $40 and a constant marginal cost of $2 per unit.We can conclude that

In a long-run equilibrium,

A firm has the following cost structure: If this firm is in a typical monopolistically competitive market,in the long run it will likely produce

When a monopolistically competitive firm is in long-run equilibrium,

A firm has the following cost structure: If this firm is in a typical perfectly competitive market,in the long run it will likely produce

In the long run,

Table 16-4 This table shows the demand schedule,marginal cost,and average total cost for a monopolistically competitive firm. -Refer to Table 16-4.What is this firm's profit maximizing level of output?

Suppose for some firm that average total cost is minimized at Q1 units of output.For a monopolistically competitive firm in long-run equilibrium,Q1