Question 1

Exhibit 10-4  For the situation depicted in Exhibit 10-4, what will happen in the long-run?

Accepted Answer

In the long-run, the profits for the firm will attract new firms to enter the market. As more firms enter, the supply will increase and the price will fall. This will eventually drive economic profit to zero for all firms in the market, leading to the exit of some firms. Hence, new firms will enter the market driving economic profit to zero.

Question 2

A rise in demand for restaurant meals is likely to cause which of the following in the long run?

Accepted Answer

An increase in demand for restaurant meals is likely to encourage more restaurants to enter the industry, expanding the supply of restaurant meals, and creating some competition among the restaurants. Therefore, the market will be able to accommodate more restaurants in the industry due to the increased demand for restaurant meals.

Question 3

In both monopolistic competition and non-price-discriminating monopoly,

Accepted Answer

In both monopolistic competition and non-price-discriminating monopoly, the marginal revenue curve lies below the demand curve. This is because in order to sell more units, the firm must lower the price for all units sold, which results in the marginal revenue being lower than the price for each unit.

Question 4

Exhibit 10-7  Assume that the firm in Exhibit 10-7 is maximizing profit.Its total revenue is

Accepted Answer

The answer of Exhibit 10-7  Assume that the firm...

Question 5

Exhibit 10-9  In order to maximize profit or minimize loss, the firm in Exhibit 10-9 should

Accepted Answer

The answer of Exhibit 10-9  In order to maximize...

Question 6

A rise in demand for restaurant meals is likely to cause which of the following in the short run?

Accepted Answer

A rise in demand for restaurant meals typically leads to higher prices and increased sales, resulting in economic profit for restaurants in the short run.

Question 7

Exhibit 10-7  At the profit-maximizing output level, total cost for the firm in Exhibit 10-7 is approximately

Accepted Answer

The profit-maximizing output level is where marginal cost equals marginal revenue, which in this case is approximately 140 units. At this output level, the total cost is approximately $4,940, which can be found by looking at the point on the graph where the quantity is 140 and following it up to the total cost curve. Therefore, the answer is D) $4,940.

Question 8

If a monopolistically competitive firm can earn a profit, it will adjust production until

Accepted Answer

In monopolistic competition, firms can earn profits in the short run but not in the long run due to the presence of low barriers to entry that attract new competitors to the market. To maximize profits in the short run, the firm will produce at the point where marginal revenue (MR) equals marginal cost (MC) because this is where the firm will earn the greatest amount of profit. Therefore, the correct choice is E, which states that the profit-maximizing firm will adjust production until MR equals MC.

Question 9

Exhibit 10-9  If the firm in Exhibit 10-9 produces 100 units of output, it will have

Accepted Answer

The answer of Exhibit 10-9  If the firm in...

Question 10

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

Accepted Answer

If the firm's marginal revenue is greater than its marginal cost, it means that the firm can increase its profit by producing and selling more units. Therefore, it should increase its quantity. However, because the firm is operating in a monopolistically competitive market, it cannot simply increase its price without losing customers to its competitors. This is because there are close substitutes available in this type of market structure. Therefore, the firm should decrease its price to attract more customers and increase its sales, which will ultimately lead to higher profits.

Question 11

Exhibit 10-7  In the long run, the firm in Exhibit 10-7 can expect

Accepted Answer

In the long run, firms in a perfectly competitive market will earn zero economic profit as new firms will enter the market driving down the price and reducing economic profit to zero. Therefore, the firm in Exhibit 10-7 can expect to earn zero economic profit in the long run.

Question 12

Assume 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

If the marginal revenue from selling an additional unit is greater than the marginal cost of producing that unit, the firm should produce and sell that unit as it will add to its economic profit. In this case, the marginal revenue ($30) is greater than the marginal cost ($23), indicating that the firm should produce and sell more. This means that the firm should increase its output level. However, it is also earning economic profit, which means that the price it is charging is higher than its average total cost. To attract more customers and increase sales, the firm should reduce its price slightly. Therefore, the firm should reduce its price and increase its output level. This choice will help the firm maintain its economic profit and increase its market share.

Question 13

Exhibit 10-8  Assume the firm in Exhibit 10-8 is currently charging price P and producing output level Q.In order to maximize profit (or minimize loss), the firm should

Accepted Answer

The firm in Exhibit 10-8 is currently producing at a level where marginal cost (MC) equals marginal revenue (MR), which is indicated by point A. However, at this output level, the firm's price is higher than the market equilibrium price (P*), which means that there is excess supply in the market. In order to increase its sales and reduce its excess supply, the firm should lower its price (i.e. charge less) and increase its output level. This would move the firm to a new point on the demand curve where MC=MR and P=P*. Therefore, the best choice for the firm to maximize profit (or minimize losses) is to charge less and sell more, as indicated by point B in the exhibit.

Question 14

Exhibit 10-5  In the long run, the firm in Exhibit 10-5 can expect

Accepted Answer

The answer of Exhibit 10-5  In the long run,...

Question 15

Exhibit 10-5  In the short run, the firm in Exhibit 10-5 should

Accepted Answer

The answer of Exhibit 10-5  In the short run,...

Question 16

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

Accepted Answer

Since the firm is producing at an output level where marginal revenue is less than marginal cost, it means the marginal cost is greater than the marginal revenue. Therefore, the firm should decrease its quantity to reduce costs and increase its price to increase revenue. By doing this, the firm can increase its profit or reduce its losses.

Question 17

Exhibit 10-4  In the short run, which of the following should the firm in Exhibit 10-4 do?

Accepted Answer

The answer of Exhibit 10-4  In the short run,...

Question 18

Exhibit 10-7  At the profit-maximizing output level, the firm in Exhibit 10-7 is

Accepted Answer

The answer of Exhibit 10-7  At the profit-maximizing output...

Question 19

Exhibit 10-6  In Exhibit 10-6, what is the maximum profit this monopolistic competitor can earn in the short run?

Accepted Answer

The answer of Exhibit 10-6  In Exhibit 10-6, what...

Question 20

Exhibit 10-6  In Exhibit 10-6, what is the profit-maximizing price for this monopolistic competitor in the short run?

Accepted Answer

The answer of Exhibit 10-6  In Exhibit 10-6, what...

Quiz 10: Monopolistic Competition and Oligopoly

Exhibit 10-4 For the situation depicted in Exhibit 10-4, what will happen in the long-run?

A rise in demand for restaurant meals is likely to cause which of the following in the long run?

In both monopolistic competition and non-price-discriminating monopoly,

Exhibit 10-7 Assume that the firm in Exhibit 10-7 is maximizing profit.Its total revenue is

Exhibit 10-9 In order to maximize profit or minimize loss, the firm in Exhibit 10-9 should

A rise in demand for restaurant meals is likely to cause which of the following in the short run?

Exhibit 10-7 At the profit-maximizing output level, total cost for the firm in Exhibit 10-7 is approximately

If a monopolistically competitive firm can earn a profit, it will adjust production until

Exhibit 10-9 If the firm in Exhibit 10-9 produces 100 units of output, it will have

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

Exhibit 10-7 In the long run, the firm in Exhibit 10-7 can expect

Assume 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 10-8 Assume the firm in Exhibit 10-8 is currently charging price P and producing output level Q.In order to maximize profit (or minimize loss) , the firm should

Exhibit 10-5 In the long run, the firm in Exhibit 10-5 can expect

Exhibit 10-5 In the short run, the firm in Exhibit 10-5 should

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

Exhibit 10-4 In the short run, which of the following should the firm in Exhibit 10-4 do?

Exhibit 10-7 At the profit-maximizing output level, the firm in Exhibit 10-7 is

Exhibit 10-6 In Exhibit 10-6, what is the maximum profit this monopolistic competitor can earn in the short run?

Exhibit 10-6 In Exhibit 10-6, what is the profit-maximizing price for this monopolistic competitor in the short run?