Question 1

Table 10.1
 $$\begin{array} { c c c } 
\mathrm { Q } & \mathrm { P } ( \$ ) & \mathrm { TC } ( \$ ) \
\hline 1 & 27 & 10 \
2 & 24 & 17 \
3 & 21 & 32 \
4 & 18 & 47 \
5 & 15 & 67
\end{array}$$
-Refer to Table 10.1,which shows the output,price,and total cost for a monopolistic competitor.The profit-maximizing price for the firm is _____

Accepted Answer

The profit-maximizing price is where marginal cost equals marginal revenue. Here, the price of $21 at quantity 3 maximizes profit, as it provides the highest difference between total revenue and total cost.

Question 2

A monopolistically competitive firm is producing at an output level where marginal revenue is greater than marginal cost.This firm should _____ quantity and _____ price to increase profit or reduce losses.

Accepted Answer

A monopolistically competitive firm will have a downward-sloping demand curve, which means that producing more will increase total revenue but at a decreasing rate. Therefore, the firm should increase quantity to increase total revenue, but since marginal revenue is greater than marginal cost, the firm should also increase price to capture some of the additional revenue as profit.

Question 3

Table 10.1
 $$\begin{array} { c c c } 
\mathrm { Q } & \mathrm { P } ( \$ ) & \mathrm { TC } ( \$ ) \
\hline 1 & 27 & 10 \
2 & 24 & 17 \
3 & 21 & 32 \
4 & 18 & 47 \
5 & 15 & 67
\end{array}$$
-Refer to Table 10.1,which shows the output,price,and total cost for a monopolistic competitor.The profit-maximizing output for the monopolistic competitor is _____

Accepted Answer

To find the profit-maximizing output for a monopolistic competitor, we need to identify the output level where marginal revenue (MR) equals marginal cost (MC). Since the table does not provide MR or MC directly, we approximate by looking for where the additional revenue from selling one more unit (the price of the next unit) is closest to the additional cost of producing one more unit (the change in total cost, or TC, from producing one more unit).- From 1 to 2 units: The price decreases from $27 to $24, suggesting a revenue increase of $24 for the second unit. The total cost increases from $10 to $17, suggesting a marginal cost of $7 for the second unit.- From 2 to 3 units: The price decreases to $21, suggesting a revenue increase of $21 for the third unit. The total cost increases from $17 to $32, suggesting a marginal cost of $15 for the third unit.- From 3 to 4 units: The price decreases to $18, suggesting a revenue increase of $18 for the fourth unit. The total cost increases from $32 to $47, suggesting a marginal cost of $15 for the fourth unit.- From 4 to 5 units: The price decreases to $15, suggesting a revenue increase of $15 for the fifth unit. The total cost increases from $47 to $67, suggesting a marginal cost of $20 for the fifth unit.The profit-maximizing output is where the price (as a proxy for MR since exact MR is not provided) is closest to or just above the MC before it exceeds MC. In this case, up to 3 units, the price each unit can be sold at is above the marginal cost of producing each additional unit. Beyond 3 units, the price falls below the marginal cost, indicating that producing more than 3 units would not maximize profit. Therefore, the profit-maximizing output is 3 units.

Question 4

If there is an increase in the demand for restaurant meals in an economy in the short run,_____

Accepted Answer

An increase in the demand for restaurant meals in an economy in the short run will likely lead to higher profits for restaurants as they will be able to charge higher prices and sell more meals. This is because in the short run, the supply of restaurants is fixed, so existing restaurants can benefit from the increased demand. However, this may not be sustainable in the long run as new restaurants may enter the market to capture the increased demand.

Question 5

Table 10.1
 $$\begin{array} { c c c } 
\mathrm { Q } & \mathrm { P } ( \$ ) & \mathrm { TC } ( \$ ) \
\hline 1 & 27 & 10 \
2 & 24 & 17 \
3 & 21 & 32 \
4 & 18 & 47 \
5 & 15 & 67
\end{array}$$
-Refer to Table 10.1,which shows the output,price,and total cost for a monopolistic competitor.At the profit-maximizing output,the monopolistically competitive firm is in _____

Accepted Answer

To determine the profit-maximizing output for a monopolistically competitive firm, we look for the output level where marginal revenue (MR) equals marginal cost (MC). Without explicit MR and MC data, we can infer from the context that the firm is maximizing profit by choosing an output level where price (P) is likely to exceed average total cost (ATC). The table doesn't provide direct information on MR or MC, but we can deduce the firm's situation based on the given data.For a monopolistically competitive firm, profit maximization occurs where MR = MC. Although the table doesn't directly show MR or MC, we can infer that at the profit-maximizing output, the firm's price is set above its average total cost (since monopolistic competitors have some degree of market power allowing them to set prices above costs), indicating a short-run scenario where the firm can earn economic profits. This situation aligns with choice C, as it suggests the firm is in a short-run equilibrium with price greater than average total cost, allowing for the possibility of economic profits.

Question 6

Exhibit 10.4
 
-Exhibit 10.4 shows the demand,marginal revenue,and cost curves for a monopolistic competitor.At the profit-maximizing output level,the firm is _____

Accepted Answer

The profit-maximizing output level for a monopolistic competitor is where marginal revenue equals marginal cost. At this point, the firm is earning an economic profit of $760, as indicated by the difference between total revenue and total cost at this output level.

Question 7

Exhibit 10.3
 
-Exhibit 10.3 shows the demand,marginal revenue,and cost curves for a monopolistic competitor.In the short run,the firm will _____

Accepted Answer

In the short run, a monopolistic competitor will produce where marginal revenue equals marginal cost, and charge a price based on the demand for that quantity. Based on the exhibit, this occurs at a quantity of 10 units, where marginal revenue is equal to marginal cost at a price of $40 per unit. Therefore, the best choice is option C.

Question 8

Exhibit 10.4
 
-Exhibit 10.4 shows the demand,marginal revenue,and cost curves for a monopolistic competitor.If the firm is producing at a profit-maximizing level of output,its total revenue is _____

Accepted Answer

In monopolistic competition, a firm maximizes profit where marginal revenue equals marginal cost. The total revenue is calculated by multiplying the price at this output level by the quantity sold. Based on the given options, $5,700 is the correct total revenue at the profit-maximizing output level.

Question 9

Exhibit 10.1
 
-Exhibit 10.1 shows the demand,marginal revenue,and cost curves for a monopolistic competitor.The price that the monopolistic competitor will charge at the profit-maximizing level of output is _____

Accepted Answer

The answer of Exhibit 10.1
 
-Exhibit 10.1 shows the demand,marginal...

Question 10

Exhibit 10.1
 
-Exhibit 10.1 shows the demand,marginal revenue,and cost curves for a monopolistic competitor.The monopolistic competitor's total economic profit at the profit-maximizing level of output is _____

Accepted Answer

The answer of Exhibit 10.1
 
-Exhibit 10.1 shows the demand,marginal...

Question 11

Table 10.1
 $$\begin{array} { c c c } 
\mathrm { Q } & \mathrm { P } ( \$ ) & \mathrm { TC } ( \$ ) \
\hline 1 & 27 & 10 \
2 & 24 & 17 \
3 & 21 & 32 \
4 & 18 & 47 \
5 & 15 & 67
\end{array}$$
-Refer to Table 10.1,which shows the output,price,and total cost for a monopolistic competitor.At the profit-maximizing output,the firm _____

Accepted Answer

The answer of Table 10.1
 \[\begin{array} { c c c...

Question 12

Exhibit 10.1
 
-Exhibit 10.1 shows the demand,marginal revenue,and cost curves for a monopolistic competitor.The monopolistic competitor is in _____

Accepted Answer

The answer of Exhibit 10.1
 
-Exhibit 10.1 shows the demand,marginal...

Question 13

Suppose a monopolistically competitive firm is earning an economic profit.The marginal revenue from selling an additional unit is $30,and the marginal cost of producing that additional unit is $23.The firm should _____

Accepted Answer

In order to maximize profits, a firm in monopolistic competition should produce the quantity where marginal revenue (MR) equals marginal cost (MC), and charge a price based on the demand for that quantity. In this scenario, the marginal revenue is greater than the marginal cost ($30 > $23), indicating that the firm could increase its profits by increasing its output level. Therefore, the firm should reduce its price (to attract more customers) and increase its output level (to sell more units and generate more revenue). Choice B is the best answer.

Question 14

Exhibit 10.3
 
-Exhibit 10.3 shows the demand,marginal revenue,and cost curves for a monopolistic competitor.In the long run,_____

Accepted Answer

In the long run, new firms will enter the market due to the presence of economic profits. As new firms enter, the demand for the existing firm's product will decrease, causing the demand curve to shift leftward, resulting in a lower equilibrium price. As a result, the firm's economic profits will decrease until they are driven to zero. This is known as the entry and exit process, and it leads to a long-run equilibrium where price equals average total cost, and economic profit is zero. Therefore, option D is the correct choice. Options A, B, C, and E are not accurate because they do not adequately describe the long-run equilibrium in a monopolistic competition market.

Question 15

In the short run,a monopolistically competitive firm is _____

Accepted Answer

In the short run, a monopolistically competitive firm is not guaranteed any specific level of economic profit due to the nature of the market structure, which allows for differentiation and some degree of market power, but also faces competition that can erode profits.

Question 16

A profit-maximizing firm in monopolistic competition should shut down in the short run if _____

Accepted Answer

A profit-maximizing firm in monopolistic competition should shut down in the short run if the price is less than average variable cost. This is because the firm would not be able to cover its variable costs, leading to losses greater than its fixed costs if it continues to operate.

Question 17

Exhibit 10.1
 
-Exhibit 10.1 shows the demand,marginal revenue,and cost curves for a monopolistic competitor.The monopolistic competitor's profit-maximizing level of output is _____

Accepted Answer

A monopolistic competitor maximizes profit where marginal revenue equals marginal cost. Without seeing Exhibit 10.1, the correct answer cannot be determined definitively. However, based on standard economic theory, the profit-maximizing output level is where the MR (Marginal Revenue) curve intersects the MC (Marginal Cost) curve.

Question 18

In the short run,a monopolistically competitive firm continues to increase production _____ if it can at least cover its variable cost.

Accepted Answer

In the short run, a monopolistically competitive firm will continue to increase production until marginal revenue (MR) equals marginal cost (MC). This is because at this point, the firm is maximizing its profit (or minimizing its loss if it is operating at a loss). Continuing to produce beyond this point would result in additional costs that exceed additional revenues, thus reducing profit.

Question 19

Exhibit 10.4
 
-Exhibit 10.4 shows the demand,marginal revenue,and cost curves for a monopolistic competitor.At the profit-maximizing output level,the total cost incurred by the firm is approximately _____

Accepted Answer

At the profit-maximizing output level, the firm produces where MR=MC. From the graph, we can see that this occurs at approximately 40 units of output. At this level of output, the demand curve intersects the marginal revenue curve, which is about $123.50. The corresponding point on the total cost curve is about $4,940. Therefore, the answer is (D) $4,940.

Question 20

Exhibit 10.2 shows a firm that charges price P* for output q*.In order to minimize loss in the short run,the firm should _____

Accepted Answer

In the short run, the firm should continue to produce as long as price is greater than or equal to average variable cost. In this case, the firm is charging price P* and producing output q* which is the point where the marginal cost curve intersects with the marginal revenue curve. At this point, the price is greater than the average variable cost, so the firm is covering its variable costs and is better off continuing to produce in the short run, even if it is not making a profit. Therefore, option D is the correct answer.

Quiz 10: Monopolistic Competition and Oligopoly

A monopolistically competitive firm is producing at an output level where marginal revenue is greater than marginal cost.This firm should _ quantity and _ price to increase profit or reduce losses.

If there is an increase in the demand for restaurant meals in an economy in the short run,_____

Exhibit 10.4 -Exhibit 10.4 shows the demand,marginal revenue,and cost curves for a monopolistic competitor.At the profit-maximizing output level,the firm is _____

Exhibit 10.3 -Exhibit 10.3 shows the demand,marginal revenue,and cost curves for a monopolistic competitor.In the short run,the firm will _____

Exhibit 10.4 -Exhibit 10.4 shows the demand,marginal revenue,and cost curves for a monopolistic competitor.If the firm is producing at a profit-maximizing level of output,its total revenue is _____

Exhibit 10.1 -Exhibit 10.1 shows the demand,marginal revenue,and cost curves for a monopolistic competitor.The price that the monopolistic competitor will charge at the profit-maximizing level of output is _____

Exhibit 10.1 -Exhibit 10.1 shows the demand,marginal revenue,and cost curves for a monopolistic competitor.The monopolistic competitor's total economic profit at the profit-maximizing level of output is _____

Exhibit 10.1 -Exhibit 10.1 shows the demand,marginal revenue,and cost curves for a monopolistic competitor.The monopolistic competitor is in _____

Suppose a monopolistically competitive firm is earning an economic profit.The marginal revenue from selling an additional unit is $30,and the marginal cost of producing that additional unit is $23.The firm should _____

Exhibit 10.3 -Exhibit 10.3 shows the demand,marginal revenue,and cost curves for a monopolistic competitor.In the long run,_____

In the short run,a monopolistically competitive firm is _____

A profit-maximizing firm in monopolistic competition should shut down in the short run if _____

Exhibit 10.1 -Exhibit 10.1 shows the demand,marginal revenue,and cost curves for a monopolistic competitor.The monopolistic competitor's profit-maximizing level of output is _____

In the short run,a monopolistically competitive firm continues to increase production _____ if it can at least cover its variable cost.

Exhibit 10.4 -Exhibit 10.4 shows the demand,marginal revenue,and cost curves for a monopolistic competitor.At the profit-maximizing output level,the total cost incurred by the firm is approximately _____

Exhibit 10.2 shows a firm that charges price P* for output q*.In order to minimize loss in the short run,the firm should _____