Question 1

Figure 16-4 
-Refer to Figure 16-4.Which of the panels shown could illustrate the short-run situation for a monopolistically competitive firm?

Accepted Answer

The answer of Figure 16-4 
-Refer to Figure 16-4.Which of...

Question 2

Figure 16-6 -Refer to Figure 16-6.If a firm in a monopolistically competitive market was producing the level of output depicted as Q_d in panel (d),it would

Accepted Answer

At output level Q_d, the firm is not maximizing its profit because it is not producing at the quantity where marginal cost equals marginal revenue, which is the profit-maximizing condition for firms in monopolistic competition.

Question 3

Figure 16-5 
-Refer to Figure 16-5.Which of the graphs depicts a monopolistically competitive firm in long-run equilibrium?

Accepted Answer

The answer of Figure 16-5 
-Refer to Figure 16-5.Which of...

Question 4

In monopolistically competitive markets,positive economic profits

Accepted Answer

The answer of In monopolistically competitive markets,positive economic profits
...

Question 5

Which of the following conditions is characteristic of a monopolistically competitive firm in long-run equilibrium?

Accepted Answer

In long-run equilibrium, a monopolistically competitive firm produces where marginal revenue (MR) equals marginal cost (MC). This leads to the firm producing a quantity where the price (P) equals the firm's average total cost (ATC) at the point of tangency with the demand curve. Therefore, ATC = demand and MR = MC are the characteristic conditions in long-run equilibrium.

Question 6

Figure 16-5 
-Refer to Figure 16-5.Which of the graphs shown would be consistent with a profit maximizing firm in a monopolistically competitive market that is earning a positive profit?

Accepted Answer

The answer of Figure 16-5 
-Refer to Figure 16-5.Which of...

Question 7

Figure 16-6 
-Refer to Figure 16-6.The firm depicted in panel b faces a horizontal demand curve.If panel b depicts a profit-maximizing firm,

Accepted Answer

The answer of Figure 16-6 
-Refer to Figure 16-6.The firm...

Question 8

Figure 16-5 
-Refer to Figure 16-5.Which of the graphs shown would be consistent with a firm in a monopolistically competitive market that is doing its best but still losing money?

Accepted Answer

Panel b shows a downward-sloping demand curve and an average total cost curve that is above the price (P > ATC). This means that the firm is producing at a quantity where it is not covering all its costs and is therefore incurring losses.

Question 9

In a monopolistically competitive market,

Accepted Answer

In a monopolistically competitive market, there are no barriers to entry, but because firms differentiate their products, they have some degree of market power. This means that there may be too few or too many firms in the market, even with free entry, as each firm is producing a slightly different product and can charge a slightly different price. Therefore, D is the correct answer.

Question 10

In monopolistically competitive markets,economic losses

Accepted Answer

Economic losses in monopolistically competitive markets suggest that some existing firms will exit the market in order to minimize their losses. This is because in monopolistically competitive markets, there are low barriers to entry and exit, which means that firms can easily enter or exit the market depending on the level of profitability. As some firms exit, the remaining firms may gain some market power and increase their prices, which can help to minimize their losses. Therefore, option A is the best choice. Option B is incorrect because new firms are more likely to enter the market when firms are making above-normal profits, rather than economic losses. Option C is incorrect because government-imposed barriers to entry would be more likely to increase economic losses in monopolistically competitive markets, rather than minimize them. Option D is incorrect because economic losses are possible in any market structure.

Question 11

Figure 16-6 
-Refer to Figure 16-6.Which of the graphs depicts the situation for a profit-maximizing firm in a monopolistically competitive market?

Accepted Answer

The answer of Figure 16-6 
-Refer to Figure 16-6.Which of...

Question 12

Figure 16-4 
-Refer to Figure 16-4.Panel b is consistent with a firm in a monopolistically competitive market that is

Accepted Answer

Panel b shows that the firm is producing at a quantity where marginal revenue (MR) is less than marginal cost (MC), indicating that the firm is not maximizing its profit. This suggests that the firm is not in long-run equilibrium because it could increase its profit by either decreasing its output or by increasing its price. Additionally, panel b does not show any information about the firm's economic profit, so we cannot conclude that it is earning a positive economic profit. Finally, panel b does not provide any information about the efficient scale of output, so we cannot conclude that the firm is producing its efficient scale of output.

Question 13

If firms in a monopolistically competitive market are earning economic profits,which of the following scenarios would best describe the change existing firms would face as the market adjusts to the long-run equilibrium?

Accepted Answer

In the long-run equilibrium, firms in monopolistically competitive markets earn zero economic profits. Therefore, if existing firms are making profits, it will attract new firms into the market. This will result in an increase of available substitutes for consumers, leading to a decrease in demand for each individual firm as consumers have more options to choose from. As a result, firms will see a decrease in profits and may even incur losses, forcing them to scale back production or exit the market.

Question 14

Which of the following conditions is characteristic of a monopolistically competitive firm in long-run equilibrium?

Accepted Answer

In a monopolistically competitive market, firms can earn positive economic profits in the short run due to product differentiation. However, in the long run, new firms can enter the market and compete away these profits, leading to a situation where firms earn zero economic profit.

In long-run equilibrium, a monopolistically competitive firm will produce where its demand curve is tangent to its average total cost (ATC) curve. This means that P = MC and demand = ATC. Therefore, choice C is the correct answer.

Question 15

Figure 16-6 
-Refer to Figure 16-6.Suppose a firm is operating in the situation depicted in panel a.Which of the following statements is correct?

Accepted Answer

The answer of Figure 16-6 
-Refer to Figure 16-6.Suppose a...

Question 16

If firms in a monopolistically competitive market are incurring economic losses,which of the following scenarios would best describe the change remaining firms would face as the market adjusts to the long-run equilibrium?

Accepted Answer

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

Question 17

If firms in a monopolistically competitive market are earning positive profits,then

Accepted Answer

When firms in a monopolistically competitive market are earning positive profits, new firms are likely to enter the market. This will increase competition and eventually drive down profits for all firms in the market. As a result, some firms may exit the market as they are unable to remain profitable in the long term. Therefore, option D is the correct answer.

Question 18

In which of the following market structures does free entry and exit play an important role in the long-run equilibrium outcome? (i)
Perfect competition
(ii)
Monopolistic competition
(iii)
Monopoly

Accepted Answer

The answer of In which of the following market structures...

Question 19

In which of the following markets is economic profit driven to zero in the long run?

Accepted Answer

In monopolistic competition, there are low barriers to entry and exit, leading to competition and the driving down of economic profits to zero in the long run. In oligopoly, firms have market power and are able to maintain economic profits. Monopolies have no close substitutes and are able to maintain economic profits in the long run. Cartels are formed by firms to reduce competition and increase their profits, but they often face the challenge of member firms cheating on the agreement.

Question 20

A monopolistically competitive firm

Accepted Answer

The answer of A monopolistically competitive firm
...

Quiz 16: Monopolistic Competition

Figure 16-4 -Refer to Figure 16-4.Which of the panels shown could illustrate the short-run situation for a monopolistically competitive firm?

Figure 16-6 -Refer to Figure 16-6.If a firm in a monopolistically competitive market was producing the level of output depicted as Q_d in panel (d) ,it would

Figure 16-5 -Refer to Figure 16-5.Which of the graphs depicts a monopolistically competitive firm in long-run equilibrium?

In monopolistically competitive markets,positive economic profits

Which of the following conditions is characteristic of a monopolistically competitive firm in long-run equilibrium?

Figure 16-5 -Refer to Figure 16-5.Which of the graphs shown would be consistent with a profit maximizing firm in a monopolistically competitive market that is earning a positive profit?

Figure 16-6 -Refer to Figure 16-6.The firm depicted in panel b faces a horizontal demand curve.If panel b depicts a profit-maximizing firm,

Figure 16-5 -Refer to Figure 16-5.Which of the graphs shown would be consistent with a firm in a monopolistically competitive market that is doing its best but still losing money?

In a monopolistically competitive market,

In monopolistically competitive markets,economic losses

Figure 16-6 -Refer to Figure 16-6.Which of the graphs depicts the situation for a profit-maximizing firm in a monopolistically competitive market?

Figure 16-4 -Refer to Figure 16-4.Panel b is consistent with a firm in a monopolistically competitive market that is

If firms in a monopolistically competitive market are earning economic profits,which of the following scenarios would best describe the change existing firms would face as the market adjusts to the long-run equilibrium?

Which of the following conditions is characteristic of a monopolistically competitive firm in long-run equilibrium?

Figure 16-6 -Refer to Figure 16-6.Suppose a firm is operating in the situation depicted in panel a.Which of the following statements is correct?

If firms in a monopolistically competitive market are incurring economic losses,which of the following scenarios would best describe the change remaining firms would face as the market adjusts to the long-run equilibrium?

If firms in a monopolistically competitive market are earning positive profits,then

In which of the following market structures does free entry and exit play an important role in the long-run equilibrium outcome? (i) Perfect competition (ii) Monopolistic competition (iii) Monopoly

In which of the following markets is economic profit driven to zero in the long run?

A monopolistically competitive firm

Quiz 16: Monopolistic Competition

Figure 16-4 -Refer to Figure 16-4.Which of the panels shown could illustrate the short-run situation for a monopolistically competitive firm?

Figure 16-6 -Refer to Figure 16-6.If a firm in a monopolistically competitive market was producing the level of output depicted as Qd in panel (d) ,it would

Figure 16-5 -Refer to Figure 16-5.Which of the graphs depicts a monopolistically competitive firm in long-run equilibrium?

In monopolistically competitive markets,positive economic profits

Which of the following conditions is characteristic of a monopolistically competitive firm in long-run equilibrium?

Figure 16-5 -Refer to Figure 16-5.Which of the graphs shown would be consistent with a profit maximizing firm in a monopolistically competitive market that is earning a positive profit?

Figure 16-6 -Refer to Figure 16-6.The firm depicted in panel b faces a horizontal demand curve.If panel b depicts a profit-maximizing firm,

Figure 16-5 -Refer to Figure 16-5.Which of the graphs shown would be consistent with a firm in a monopolistically competitive market that is doing its best but still losing money?

In a monopolistically competitive market,

In monopolistically competitive markets,economic losses

Figure 16-6 -Refer to Figure 16-6.Which of the graphs depicts the situation for a profit-maximizing firm in a monopolistically competitive market?

Figure 16-4 -Refer to Figure 16-4.Panel b is consistent with a firm in a monopolistically competitive market that is

If firms in a monopolistically competitive market are earning economic profits,which of the following scenarios would best describe the change existing firms would face as the market adjusts to the long-run equilibrium?

Which of the following conditions is characteristic of a monopolistically competitive firm in long-run equilibrium?

Figure 16-6 -Refer to Figure 16-6.Suppose a firm is operating in the situation depicted in panel a.Which of the following statements is correct?

If firms in a monopolistically competitive market are incurring economic losses,which of the following scenarios would best describe the change remaining firms would face as the market adjusts to the long-run equilibrium?

If firms in a monopolistically competitive market are earning positive profits,then

In which of the following market structures does free entry and exit play an important role in the long-run equilibrium outcome? (i) Perfect competition (ii) Monopolistic competition (iii) Monopoly

In which of the following markets is economic profit driven to zero in the long run?

A monopolistically competitive firm

Figure 16-6 -Refer to Figure 16-6.If a firm in a monopolistically competitive market was producing the level of output depicted as Q_d in panel (d) ,it would