Question 1

In the long run, monopolistically competitive firms earn ______economic profits due to ______.

Accepted Answer

The answer of In the long run, monopolistically competitive firms...

Question 2

In the long run, a monopolistically competitive firm produces where its______ is______ its demand curve.

Accepted Answer

In the long run, a monopolistically competitive firm produces at a point where its average total cost curve is tangent to its demand curve, indicating the point of zero economic profit.

Question 3

Only monopolies and dominant firms have market power.

Accepted Answer

Market power refers to the ability of a firm to influence the market price of a good or service. While monopolies and dominant firms typically have significant market power, other firms can also have market power in certain circumstances, such as when they have unique products or brand recognition.

Question 4

Of the monopoly, dominant firm, and monopolistic competition models,______ use marginal analysis to determine the profit- maximizing quantity of production.

Accepted Answer

All three models use marginal analysis to determine the profit-maximizing quantity of production. Marginal analysis involves evaluating the additional cost and additional revenue associated with each unit of output, in order to determine where marginal cost and marginal revenue are equal and thus optimize profits. Monopolies, dominant firms, and monopolistically competitive firms all rely on this type of analysis to determine their pricing and output decisions.

Question 5

When managers of monopolistically competitive firms solve for the profit- maximizing quantity, they are determining the market quantity.

Accepted Answer

Managers of monopolistically competitive firms cannot determine the market quantity as they do not have control over the market demand curve. They can only determine the quantity they will produce and sell at a profit-maximizing price. The market quantity is determined by the interaction of all firms in the industry and the market demand curve.

Question 6

If a monopolistically competitive firm is producing 6,000 units of output and at this output level, the price is $15 and the average total cost is $15, it is possible for the firm to be in long- run equilibrium.

Accepted Answer

In monopolistic competition, firms can earn normal profits in the long run as price equals average total cost. Therefore, if the firm is producing at a level where price equals average total cost, it is possible for the firm to be in long-run equilibrium.

Question 7

If a monopolistically competitive firm is producing 4,000 units of output and at this output level, the price is $18 and the average total cost is $8, it is not possible for the firm to be in long- run equilibrium.

Accepted Answer

In long-run equilibrium, a monopolistically competitive firm will produce where price equals average total cost (P = ATC), earning zero economic profit. Here, the price ($18) is greater than the average total cost ($8), indicating the firm is earning a profit, which is not a long-run equilibrium condition.

Question 8

If a monopolistically competitive firm is producing 2,000 units of output and at this output level, the price is $10 and the average total cost is $10, it is not possible for the firm to be in long- run equilibrium.

Accepted Answer

In long-run equilibrium, a monopolistically competitive firm produces at a level where price equals average total cost, allowing it to break even, which is the scenario described.

Question 9

If a monopolistically competitive firm is producing 9,000 units of output and at this output level, the price is $10 and the average total cost is $10, the firm profit/loss is equal to _______ and it ______possible for the firm to be in long- run equilibrium.

Accepted Answer

In a monopolistically competitive market, if the price equals the average total cost, the firm makes zero economic profit. This condition is possible in long-run equilibrium, where firms earn normal profit but no economic profit.

Question 10

If a monopolistically competitive firm is producing 500 units of output and at this output level, the price is $2 and the average total cost is $2, the firm profit/loss is equal to _______ and it _______ possible for the firm to be in long- run equilibrium.

Accepted Answer

In a monopolistically competitive market, if the price equals the average total cost, the firm is making zero economic profit. This condition is possible in long-run equilibrium, where firms earn normal profit but no economic profit.

Question 11

If a monopolistically competitive firm is producing 450 units of output and at this output level, the price is $15 and the average total cost is $12, the firm profit/loss is equal to _______ .

Accepted Answer

The firm's profit is calculated as (Price - Average Total Cost) * Quantity = ($15 - $12) * 450 = $3 * 450 = $1,350.

Question 12

In the long run, a monopolistically competitive firm produces where its______ is tangent to its______ .

Accepted Answer

In the long run, a monopolistically competitive firm produces at a point where its average total cost curve is tangent to its demand curve, indicating the point of zero economic profit.

Question 13

If a monopolistically competitive firm is producing 800 units of output and the marginal revenue from producing the 800th unit of output is $2.25 and the marginal cost is $2.25, which of the following is true?

Accepted Answer

If the marginal revenue and marginal cost are equal at a certain level of output, the firm is maximizing profit at that level. Therefore, the firm should not increase or decrease production, and is already maximizing profit. The information given about the 1,200th unit of output is irrelevant to determining the current profit-maximizing level of production.

Question 14

If a monopolistically competitive firm is producing 5,000 units of output and at this output level, the price is $20 and the average total cost is $7, the firm profit/loss is equal to ______.

Accepted Answer

The firm's profit is calculated as (Price - Average Total Cost) * Quantity = ($20 - $7) * 5,000 = $13 * 5,000 = $65,000.

Question 15

The______ of barriers to entry _______ monopolistically competitive firms from earning positive economic profits in the long run.

Accepted Answer

A lack of barriers to entry prevents monopolistically competitive firms from earning positive economic profits in the long run. If a firm earns economic profits, other firms could enter the market and offer similar products, driving down demand for the original firm's product and reducing its market share and profits. Therefore, a lack of barriers to entry promotes competition and prevents firms from maintaining long-term economic profits.

Question 16

Monopolistically competitive firms ______earn profits in the long run due to______ .

Accepted Answer

Monopolistically competitive firms cannot earn profits in the long run due to no barriers to entry, which allows new firms to enter the market, increasing competition and driving down profits.

Question 17

If a monopolistically competitive firm is producing 50,000 units of output and at this output level, the price is $200 and the average total cost is $198, the firm profit/loss is equal to ______and it______ possible for the firm to be in long- run equilibrium.

Accepted Answer

To calculate the profit/loss, we need to use the formula:

Profit = (Price - Average Total Cost) x Quantity

Substituting the given values, we get:

Profit = ($200 - $198) x 50,000 
Profit = $2 x 50,000 
Profit = $100,000

So the firm is making a profit of $100,000.

However, it is not possible for the firm to be in long-run equilibrium. In a monopolistically competitive market, firms have some control over the price they charge, due to product differentiation. This means that other firms can enter the market and offer a similar product, reducing the demand and price for the original firm. In the long run, profits will attract new firms to enter the market, causing the demand and price for the original firm to decrease. As the price falls, the firm's profit will decrease, and it may even start to make losses.

Therefore, the firm in the question may be making a profit in the short run, but it is not possible for it to be in long-run equilibrium.

Question 18

If a monopolistically competitive firm is producing 25,000 units of output and at this output level, the price is $80 and the average total cost is $79, the firm profit/loss is equal to _______ and it ______possible for the firm to be in long- run equilibrium.

Accepted Answer

The answer of If a monopolistically competitive firm is producing...

Question 19

If a monopolistically competitive firm is producing 30,000 units of output and at this output level, the price is $100 and the average total cost is $100, the firm profit/loss is equal to ______and it ______possible for the firm to be in long- run equilibrium.

Accepted Answer

In a monopolistically competitive market, if the price equals the average total cost, the firm is making zero economic profit. This condition is possible in long-run equilibrium, where firms earn normal profit but no economic profit.

Question 20

If a monopolistically competitive firm is producing 7,000 units of output and at this output level, the price is $12 and the average total cost is $10, the firm profit/loss is equal to _______ and it possible ______for the firm to be in long- run equilibrium.

Accepted Answer

To determine the profit/loss for the firm, we need to calculate the total revenue and total cost.
Total revenue = Price x Quantity = $12 x 7,000 = $84,000
Total cost = Average total cost x Quantity = $10 x 7,000 = $70,000
Profit = Total revenue - Total cost = $84,000 - $70,000 = $14,000
Therefore, the profit/loss for the firm is $14,000.
To determine if the firm is in long-run equilibrium, we need to consider whether the firm is earning normal profit (zero economic profit) in the long run. If the firm is earning positive economic profit in the short-run, other firms will enter the market to earn the same profit, causing the demand for the firm's product to decrease and the price to fall. As the price falls, the firm's profit will decrease until it reaches normal profit in the long-run. If the firm is earning negative economic profit in the short-run, some firms will exit the market, causing the demand for the firm's product to increase and the price to rise. As the price rises, the firm's profit will increase until it reaches normal profit in the long-run. Thus, we cannot determine whether the firm is in long-run equilibrium based on the information given. Therefore, the correct answer is B.

Quiz 6: Monopoly and Monopolistic Competition

In the long run, monopolistically competitive firms earn economic profits due to .

In the long run, a monopolistically competitive firm produces where its is its demand curve.

Only monopolies and dominant firms have market power.

Of the monopoly, dominant firm, and monopolistic competition models,______ use marginal analysis to determine the profit- maximizing quantity of production.

When managers of monopolistically competitive firms solve for the profit- maximizing quantity, they are determining the market quantity.

If a monopolistically competitive firm is producing 6,000 units of output and at this output level, the price is $15 and the average total cost is $15, it is possible for the firm to be in long- run equilibrium.

If a monopolistically competitive firm is producing 4,000 units of output and at this output level, the price is $18 and the average total cost is $8, it is not possible for the firm to be in long- run equilibrium.

If a monopolistically competitive firm is producing 2,000 units of output and at this output level, the price is $10 and the average total cost is $10, it is not possible for the firm to be in long- run equilibrium.

If a monopolistically competitive firm is producing 9,000 units of output and at this output level, the price is $10 and the average total cost is $10, the firm profit/loss is equal to _ and it possible for the firm to be in long- run equilibrium.

If a monopolistically competitive firm is producing 500 units of output and at this output level, the price is $2 and the average total cost is $2, the firm profit/loss is equal to _ and it _ possible for the firm to be in long- run equilibrium.

If a monopolistically competitive firm is producing 450 units of output and at this output level, the price is $15 and the average total cost is $12, the firm profit/loss is equal to _______ .

In the long run, a monopolistically competitive firm produces where its is tangent to its .

If a monopolistically competitive firm is producing 800 units of output and the marginal revenue from producing the 800th unit of output is $2.25 and the marginal cost is $2.25, which of the following is true?

If a monopolistically competitive firm is producing 5,000 units of output and at this output level, the price is $20 and the average total cost is $7, the firm profit/loss is equal to ______.

The of barriers to entry _ monopolistically competitive firms from earning positive economic profits in the long run.

Monopolistically competitive firms earn profits in the long run due to .

If a monopolistically competitive firm is producing 50,000 units of output and at this output level, the price is $200 and the average total cost is $198, the firm profit/loss is equal to and it possible for the firm to be in long- run equilibrium.

If a monopolistically competitive firm is producing 25,000 units of output and at this output level, the price is $80 and the average total cost is $79, the firm profit/loss is equal to _ and it possible for the firm to be in long- run equilibrium.

If a monopolistically competitive firm is producing 30,000 units of output and at this output level, the price is $100 and the average total cost is $100, the firm profit/loss is equal to and it possible for the firm to be in long- run equilibrium.

If a monopolistically competitive firm is producing 7,000 units of output and at this output level, the price is $12 and the average total cost is $10, the firm profit/loss is equal to _ and it possible for the firm to be in long- run equilibrium.