Question 1

In the long run,if the demand curve of a monopolistically competitive firm is tangent to its average total cost curve then

Accepted Answer

If the demand curve of a monopolistically competitive firm is tangent to its average total cost curve, it means that the firm is producing at its optimal level of output where it is minimizing its costs and maximizing its profits. At this level of output, the firm's total revenue will be equal to its total cost, and therefore it will break even.

Question 2

If firms in a monopolistically competitive market are earning economic profits,which of the following scenarios best reflects the change a representative firm experiences as the market adjusts to its long-run equilibrium?

Accepted Answer

The answer of If firms in a monopolistically competitive market...

Question 3

Which of the following would not occur as a result of a monopolistically competitive firm suffering a short-run economic loss?

Accepted Answer

The answer of Which of the following would not occur...

Question 4

Figure 11-13
 
-Refer to Figure 11-13.What is the area that represents the firm's profit?

Accepted Answer

The answer of Figure 11-13
 
-Refer to Figure 11-13.What is...

Question 5

One reason Starbucks experienced a decline in sales in the late 2000s is because

Accepted Answer

Starbucks faced increasing competition from other coffeehouses that offered similar products and experiences, making it harder for them to differentiate themselves and maintain their market share.

Question 6

When new firms are encouraged to enter a monopolistically competitive market

Accepted Answer

If new firms are encouraged to enter a monopolistically competitive market, it is likely because existing firms are earning economic profits. In monopolistic competition, firms can differentiate their products to some extent, which allows them to have a certain degree of market power and charge prices above their marginal cost. If new firms enter and start producing similar products, they will increase competition and reduce the market power of existing firms, leading to lower profits. Therefore, new firms are unlikely to enter a monopolistically competitive market if existing firms are earning losses or normal profits.

Question 7

The entry and exit of firms in a monopolistically competitive market guarantee that

Accepted Answer

The answer of The entry and exit of firms in...

Question 8

According to a Wall Street Journal article,hhgregg has differentiated itself from its competition,particularly from large chain stores such as Best Buy

Accepted Answer

The article states that hhgregg has differentiated itself from its competition by "providing better customer service." There is no mention of charging lower prices, selling inferior products, or offering discounts for cash sales as ways in which hhgregg stands out from other retailers.

Question 9

In theory,in the long run,monopolistically competitive firms earns zero profits.However,in reality there are some ways by which a firm can avoid losing profits.Which of the following is one such way?

Accepted Answer

By identifying new markets and developing products precisely for those markets, a firm can differentiate itself from others and potentially earn higher profits in the long run. This strategy allows the firm to avoid direct competition with other firms and therefore maintain a certain level of pricing power. Gradually increasing markups or lowering prices can lead to short-term profits but may not be sustainable in the long run. Narrowing the market niche can also lead to short-term profits but may limit the potential for growth in the future.

Question 10

Firms such as Caribou Coffee and Diedrich Coffee operate hundreds of coffeehouses nationwide while firms such as Dunn Brothers Coffee operate only in four states.How would you characterize these stores?

Accepted Answer

All the firms operate in a highly competitive industry known for excess capacity, product differentiation, and non-price competition. This makes them all monopolistic competitors. While Caribou Coffee and Diedrich Coffee operate more stores nationwide, they still face stiff competition from other coffeehouse chains and independent coffee shops. Dunn Brothers Coffee, which operates in only four states, still faces competition from other coffee shops in those states. Therefore, they all fall under the category of monopolistic competitors.

Question 11

A monopolistically competitive firm that earns an accounting profit in the short run

Accepted Answer

A monopolistically competitive firm that earns an accounting profit in the short run could earn an economic profit if the price it charges exceeds its average total cost, break even if the price equals its average total cost, or suffer an economic loss if the price is less than its average total cost. Therefore, it could earn an economic profit, break even, or suffer an economic loss in the short run.

Question 12

Tony's Italian Ice is a monopolistically competitive firm.If Tony's earns a profit in the short run,which of the following is most likely to occur?

Accepted Answer

The answer of Tony's Italian Ice is a monopolistically competitive...

Question 13

If firms in a monopolistically competitive industry are making profits in the short run

Accepted Answer

The answer of If firms in a monopolistically competitive industry...

Question 14

Figure 11-13
 
-Refer to Figure 11-13.Economies of scale are exhausted at which output level?

Accepted Answer

Economies of scale are exhausted at Q₃ units because at this output level, the average total cost curve is at its minimum point.

Question 15

Long-run equilibrium under monopolistic competition and perfect competition is similar in that

Accepted Answer

The answer of Long-run equilibrium under monopolistic competition and perfect...

Question 16

Figure 11-13
 
-Refer to Figure 11-13.What is the output price?

Accepted Answer

The answer of Figure 11-13
 
-Refer to Figure 11-13.What is...

Question 17

Figure 11-13
 
-Refer to Figure 11-13.What is the profit maximizing output level?

Accepted Answer

The answer of Figure 11-13
 
-Refer to Figure 11-13.What is...

Question 18

Figure 11-12
  
Figure 11-12 shows short-run cost and demand curves for a monopolistically competitive firm in the market for designer watches.
-Refer to Figure 11-12.If the diagram represents a typical firm in the designer watch market,what is likely to happen in the long run?

Accepted Answer

The answer of Figure 11-12
  
Figure 11-12 shows short-run...

Question 19

Which of the following describes the relative positions of the demand curve and the average total cost (ATC)curve of a monopolistically competitive firm that earns a profit in the short run?

Accepted Answer

The answer of Which of the following describes the relative...

Question 20

The financial situation at Starbucks in the late 2000s illustrates the fact that maintaining long-run profits in a monopolistically competitive market is

Accepted Answer

Maintaining long-run profits in a monopolistically competitive market is very difficult because firms in such markets have limited market power, face competition from close substitutes, and tend to have high advertising and marketing costs, which can erode profits. The financial situation at Starbucks in the late 2000s, which saw a decline in profits due to the economic recession and increased competition from other coffee chains, illustrates this difficulty.

Quiz 11: Monopolistic Competition and Oligopoly

In the long run,if the demand curve of a monopolistically competitive firm is tangent to its average total cost curve then

If firms in a monopolistically competitive market are earning economic profits,which of the following scenarios best reflects the change a representative firm experiences as the market adjusts to its long-run equilibrium?

Which of the following would not occur as a result of a monopolistically competitive firm suffering a short-run economic loss?

Figure 11-13 -Refer to Figure 11-13.What is the area that represents the firm's profit?

One reason Starbucks experienced a decline in sales in the late 2000s is because

When new firms are encouraged to enter a monopolistically competitive market

The entry and exit of firms in a monopolistically competitive market guarantee that

According to a Wall Street Journal article,hhgregg has differentiated itself from its competition,particularly from large chain stores such as Best Buy

In theory,in the long run,monopolistically competitive firms earns zero profits.However,in reality there are some ways by which a firm can avoid losing profits.Which of the following is one such way?

Firms such as Caribou Coffee and Diedrich Coffee operate hundreds of coffeehouses nationwide while firms such as Dunn Brothers Coffee operate only in four states.How would you characterize these stores?

A monopolistically competitive firm that earns an accounting profit in the short run

Tony's Italian Ice is a monopolistically competitive firm.If Tony's earns a profit in the short run,which of the following is most likely to occur?

If firms in a monopolistically competitive industry are making profits in the short run

Figure 11-13 -Refer to Figure 11-13.Economies of scale are exhausted at which output level?

Long-run equilibrium under monopolistic competition and perfect competition is similar in that

Figure 11-13 -Refer to Figure 11-13.What is the output price?

Figure 11-13 -Refer to Figure 11-13.What is the profit maximizing output level?

Figure 11-12 Figure 11-12 shows short-run cost and demand curves for a monopolistically competitive firm in the market for designer watches. -Refer to Figure 11-12.If the diagram represents a typical firm in the designer watch market,what is likely to happen in the long run?

Which of the following describes the relative positions of the demand curve and the average total cost (ATC) curve of a monopolistically competitive firm that earns a profit in the short run?

The financial situation at Starbucks in the late 2000s illustrates the fact that maintaining long-run profits in a monopolistically competitive market is