Question 1

Table 10.5  Table 10.5 shows the demand and cost data facing a monopolistically competitive producer of canvas bags.
-Refer to Table 10.5.The firm's profit-maximising or loss-minimising price and quantity are

Accepted Answer

To find the profit-maximizing quantity, we look for the quantity at which marginal revenue equals marginal cost. From the table, we can see that at quantity 4, the marginal revenue is $10 and the marginal cost is $12, so this is the profit-maximizing quantity. To find the price, we look at the demand curve at this quantity and see that it gives a price of $12. Therefore, the firm's profit-maximizing price and quantity are price = $12; quantity = 4.

Question 2

Table 10.4  Table 10.4 lists estimated revenues and costs (per week)for plastic vials (100 vials per box)for the Victoria Biological Supplies Company.Victoria sells plastic vials to university and private research laboratories.
-Refer to Table 10.4.Victoria's profit-maximising quantity sold (Q)and price (P)are

Accepted Answer

To determine the profit-maximising quantity sold and price, we need to find the point where marginal revenue equals marginal cost. We can calculate marginal revenue by finding the change in total revenue from producing one more unit. We can calculate marginal cost by finding the change in total cost from producing one more unit.

Using the data in the table, we can calculate the marginal revenue and marginal cost for each level of output:

| Q | TR | MR | TC | MC |
| - | -- | -- | -- | -- |
| 1 | 20 |   | 15 |    |
| 2 | 40 | 20 | 28 |  13 |
| 3 | 54 | 14 | 38 |  10 |
| 4 | 64 | 10 | 48 |  10 |
| 5 | 70 |  6 | 63 |  15 |
| 6 | 72 |  2 | 78 |  15 |

From this table, we can see that the profit-maximising quantity sold is 4, where marginal revenue equals marginal cost ($10 per vial). At this quantity, the price is $6 per vial (from the total revenue column). Therefore, the best choice is B.

Question 3

Table 10.5  Table 10.5 shows the demand and cost data facing a monopolistically competitive producer of canvas bags.
-Refer to Table 10.5.At the profit-maximising or loss-minimising output level

Accepted Answer

The firm makes a profit of $16 at the profit-maximising output level.

Question 4

Figure 10.5 -Refer to Figure 10.5.The chocolate store represented in the diagram is currently selling Q_a units of candy at a price of P_a.Is this candy store maximising its profit and if it is not, what would you recommend to the firm?

Accepted Answer

The candy store is not maximizing its profit, as it can sell more candy at a lower price. The optimal price and quantity combination is where the marginal cost and marginal revenue intersect. Looking at the diagram, this occurs at point E, where the price is P_b and the quantity sold is Q_b. Thus, the candy store should lower its price to P_b and sell Q_b units to maximize its profit.

Question 5

Figure 10.8  Figure 10.8 shows cost and demand curves for a monopolistically competitive producer of iced tea.
-Refer to Figure 10.8.The profit-maximising output level is

Accepted Answer

The profit-maximizing output level is where marginal cost equals marginal revenue. In Figure 10.8, this occurs at an output level of 22 cases.

Question 6

Suppose a monopolistically competitive firm's output where marginal revenue equals marginal cost is 66 units and the price corresponding to this quantity is $18.If the average total cost at this output is $16.55, its total profit is

Accepted Answer

Total profit is calculated as (Price - Average Total Cost) x Quantity, which is ($18 - $16.55) x 66 = $95.70.

Question 7

Figure 10.7  Figure 10.7 shows short-run cost and demand curves for a monopolistically competitive firm in the footwear market.
-Refer to Figure 10.7.Which of the following statements describes the best course of action for the firm depicted in the diagram?

Accepted Answer

The best course of action for the firm depicted in the diagram is to produce the quantity where marginal revenue (MR) equals marginal cost (MC), which is Q_y units. This will minimize the losses of the firm. At this output level, the firm should charge a price equal to the demand curve at that quantity, which is P₁. This price is above the average variable cost, so the firm is covering its variable costs, but it is below the average total cost, so the firm is incurring losses in the short run. However, producing and selling at this output level is better than shutting down immediately because shutting down would result in a total loss equal to the fixed costs.

Question 8

Figure 10.8  Figure 10.8 shows cost and demand curves for a monopolistically competitive producer of iced tea.
-Refer to Figure 10.8.The firm's profit-maximising price is

Accepted Answer

The answer of Figure 10.8  Figure 10.8 shows cost...

Question 9

Table 10.4  Table 10.4 lists estimated revenues and costs (per week)for plastic vials (100 vials per box)for the Victoria Biological Supplies Company.Victoria sells plastic vials to university and private research laboratories.
-Refer to Table 10.4.Based on the data in the table, which of the following statements is true?

Accepted Answer

The table only presents estimates for the short run, indicating that Victoria's revenues and costs are subject to change in the long run. Furthermore, we cannot determine whether Victoria is a perfectly competitive or monopolistically competitive firm based on the information provided. There is no indication that Victoria should shut down temporarily or advertise more to increase demand.

Question 10

The profit-maximising rule for a monopolistically competitive firm is to select the quantity at which

Accepted Answer

A monopolistically competitive firm will maximize profit by producing the quantity at which marginal revenue equals marginal cost. This is because monopolistically competitive firms have downward-sloping demand curves, so producing more will lower the price and decrease marginal revenue, while producing less will increase marginal cost. Therefore, selecting the quantity where MR=MC will result in the highest profit for the firm.

Question 11

A monopolistically competitive firm maximises profit in the short run by producing where

Accepted Answer

A monopolistically competitive firm maximises profit in the short run by producing where price is greater than marginal cost, as this ensures that the firm can cover its variable costs and earn a positive economic profit.

Question 12

Table 10.4  Table 10.4 lists estimated revenues and costs (per week)for plastic vials (100 vials per box)for the Victoria Biological Supplies Company.Victoria sells plastic vials to university and private research laboratories.
-Refer to Table 10.4.Victoria's profit-maximising output is where

Accepted Answer

Victoria's profit-maximising output occurs where marginal revenue (MR) equals marginal cost (MC). From Table 10.4, we can see that the marginal cost is constant at $2 per box, while the marginal revenue declines as the quantity sold increases. The marginal revenue equals $3 when 2 boxes are sold per week, and remains at $3 for any higher quantity sold. Therefore, Victoria's profit-maximising output is where marginal revenue and marginal cost both equal $3, which is achieved by selling 2 boxes per week. At this output level, the total revenue is $14, the total cost is $8, and the total profit is $6, which is the highest possible profit for Victoria. Thus, the correct answer is C.

Question 13

How do both monopolistically competitive firms and perfectly competitive firms maximise profit?

Accepted Answer

Both monopolistically competitive firms and perfectly competitive firms maximise profit by producing where marginal revenue is equal to marginal cost. This is because at this point, the firm is producing the quantity of output where the additional revenue from producing one more unit is equal to the additional cost of producing that unit. This ensures that the firm is maximising its profits and not producing too much or too little. Options A, B, and D do not accurately represent the profit-maximising point for these types of firms.

Question 14

A monopolistically competitive firm chooses

Accepted Answer

In a monopolistically competitive market, firms have some degree of control over the price they charge for their product, but they face competition from other firms selling similar products. Therefore, while they can set the price, market forces determine the quantity they will be able to sell.

Question 15

If a monopolistically competitive firm is producing 50 units of output where marginal cost equals marginal revenue, total cost is $1674 and total revenue is $2000, its average profit is

Accepted Answer

Average profit is calculated by subtracting total cost from total revenue and then dividing by the quantity of output. Here, ($2000 - $1674) / 50 = $326 / 50 = $6.52.

Question 16

Figure 10.6 
-Refer to Figure 10.6.Suppose Dell finds the relationship between the average total cost of producing notebook computers and the quantity of notebook computers produced is as shown by Figure 10-6.Dell will maximise profits if it produces ________ notebook computers per month.

Accepted Answer

Without seeing Figure 10.6 or having details on prices, demand, or the specific shape of the cost curve, it's impossible to determine the profit-maximizing quantity of notebook computers.

Question 17

After selling 1000 three-ring binders, Tony DiFulvio realises that the marginal revenue from selling the last binder was less than the marginal cost.From this we can conclude that

Accepted Answer

When the marginal revenue is less than the marginal cost, it means that the cost of producing one more unit is greater than the revenue generated from selling that unit. Therefore, it is likely that Tony's profit fell after selling his 1000th binder. Option A is incorrect because if Tony was earning a short-run economic profit, then the marginal revenue should have been greater than the marginal cost. Option B is also incorrect because shutting down his business temporarily would not necessarily solve the problem of falling profits. Option D is incorrect because if the marginal revenue is less than the marginal cost, then selling an additional binder would lead to even lower profits.

Question 18

Table 10.4  Table 10.4 lists estimated revenues and costs (per week)for plastic vials (100 vials per box)for the Victoria Biological Supplies Company.Victoria sells plastic vials to university and private research laboratories.
-Refer to Table 10.4.What is true at Victoria's profit-maximising output?

Accepted Answer

At Victoria's profit-maximizing output, the difference between total revenue and total cost is maximized, which is indicated by total revenue of $24 and total cost of $20, leading to a profit of $4, not $2 as option A suggests. Options C and D do not match this optimal condition.

Question 19

Figure 10.7  Figure 10.7 shows short-run cost and demand curves for a monopolistically competitive firm in the footwear market.
-Refer to Figure 10.7.The area that represents the profit or loss experienced by the firm is

Accepted Answer

The area below the average variable cost curve and above the price line represents a loss.

Question 20

A monopolistically competitive firm is producing an output level where marginal revenue is greater than marginal cost.What should this firm do to increase its profit or reduce its losses?

Accepted Answer

The answer of A monopolistically competitive firm is producing an...

Quiz 10: Monopolistic Competition: The Competitive Model in a More Realistic

Table 10.5 Table 10.5 shows the demand and cost data facing a monopolistically competitive producer of canvas bags. -Refer to Table 10.5.The firm's profit-maximising or loss-minimising price and quantity are

Table 10.5 Table 10.5 shows the demand and cost data facing a monopolistically competitive producer of canvas bags. -Refer to Table 10.5.At the profit-maximising or loss-minimising output level

Figure 10.5 -Refer to Figure 10.5.The chocolate store represented in the diagram is currently selling Q_a units of candy at a price of P_a.Is this candy store maximising its profit and if it is not, what would you recommend to the firm?

Figure 10.8 Figure 10.8 shows cost and demand curves for a monopolistically competitive producer of iced tea. -Refer to Figure 10.8.The profit-maximising output level is

Suppose a monopolistically competitive firm's output where marginal revenue equals marginal cost is 66 units and the price corresponding to this quantity is $18.If the average total cost at this output is $16.55, its total profit is

Figure 10.7 Figure 10.7 shows short-run cost and demand curves for a monopolistically competitive firm in the footwear market. -Refer to Figure 10.7.Which of the following statements describes the best course of action for the firm depicted in the diagram?

Figure 10.8 Figure 10.8 shows cost and demand curves for a monopolistically competitive producer of iced tea. -Refer to Figure 10.8.The firm's profit-maximising price is

The profit-maximising rule for a monopolistically competitive firm is to select the quantity at which

A monopolistically competitive firm maximises profit in the short run by producing where

Table 10.4 Table 10.4 lists estimated revenues and costs (per week) for plastic vials (100 vials per box) for the Victoria Biological Supplies Company.Victoria sells plastic vials to university and private research laboratories. -Refer to Table 10.4.Victoria's profit-maximising output is where

How do both monopolistically competitive firms and perfectly competitive firms maximise profit?

A monopolistically competitive firm chooses

If a monopolistically competitive firm is producing 50 units of output where marginal cost equals marginal revenue, total cost is $1674 and total revenue is $2000, its average profit is

Figure 10.6 -Refer to Figure 10.6.Suppose Dell finds the relationship between the average total cost of producing notebook computers and the quantity of notebook computers produced is as shown by Figure 10-6.Dell will maximise profits if it produces ________ notebook computers per month.

After selling 1000 three-ring binders, Tony DiFulvio realises that the marginal revenue from selling the last binder was less than the marginal cost.From this we can conclude that

Figure 10.7 Figure 10.7 shows short-run cost and demand curves for a monopolistically competitive firm in the footwear market. -Refer to Figure 10.7.The area that represents the profit or loss experienced by the firm is

A monopolistically competitive firm is producing an output level where marginal revenue is greater than marginal cost.What should this firm do to increase its profit or reduce its losses?

Quiz 10: Monopolistic Competition: The Competitive Model in a More Realistic

Table 10.5 Table 10.5 shows the demand and cost data facing a monopolistically competitive producer of canvas bags. -Refer to Table 10.5.The firm's profit-maximising or loss-minimising price and quantity are

Table 10.5 Table 10.5 shows the demand and cost data facing a monopolistically competitive producer of canvas bags. -Refer to Table 10.5.At the profit-maximising or loss-minimising output level

Figure 10.5 -Refer to Figure 10.5.The chocolate store represented in the diagram is currently selling Qa units of candy at a price of Pa.Is this candy store maximising its profit and if it is not, what would you recommend to the firm?

Figure 10.8 Figure 10.8 shows cost and demand curves for a monopolistically competitive producer of iced tea. -Refer to Figure 10.8.The profit-maximising output level is

Suppose a monopolistically competitive firm's output where marginal revenue equals marginal cost is 66 units and the price corresponding to this quantity is $18.If the average total cost at this output is $16.55, its total profit is

Figure 10.7 Figure 10.7 shows short-run cost and demand curves for a monopolistically competitive firm in the footwear market. -Refer to Figure 10.7.Which of the following statements describes the best course of action for the firm depicted in the diagram?

Figure 10.8 Figure 10.8 shows cost and demand curves for a monopolistically competitive producer of iced tea. -Refer to Figure 10.8.The firm's profit-maximising price is

The profit-maximising rule for a monopolistically competitive firm is to select the quantity at which

A monopolistically competitive firm maximises profit in the short run by producing where

Table 10.4 Table 10.4 lists estimated revenues and costs (per week) for plastic vials (100 vials per box) for the Victoria Biological Supplies Company.Victoria sells plastic vials to university and private research laboratories. -Refer to Table 10.4.Victoria's profit-maximising output is where

How do both monopolistically competitive firms and perfectly competitive firms maximise profit?

A monopolistically competitive firm chooses

If a monopolistically competitive firm is producing 50 units of output where marginal cost equals marginal revenue, total cost is $1674 and total revenue is $2000, its average profit is

Figure 10.6 -Refer to Figure 10.6.Suppose Dell finds the relationship between the average total cost of producing notebook computers and the quantity of notebook computers produced is as shown by Figure 10-6.Dell will maximise profits if it produces ________ notebook computers per month.

After selling 1000 three-ring binders, Tony DiFulvio realises that the marginal revenue from selling the last binder was less than the marginal cost.From this we can conclude that

Figure 10.7 Figure 10.7 shows short-run cost and demand curves for a monopolistically competitive firm in the footwear market. -Refer to Figure 10.7.The area that represents the profit or loss experienced by the firm is

A monopolistically competitive firm is producing an output level where marginal revenue is greater than marginal cost.What should this firm do to increase its profit or reduce its losses?

Figure 10.5 -Refer to Figure 10.5.The chocolate store represented in the diagram is currently selling Q_a units of candy at a price of P_a.Is this candy store maximising its profit and if it is not, what would you recommend to the firm?