Question 1

Firms such as Costa Coffee and Starbucks Coffee operate hundreds of coffeehouses nationwide while firms such as Delight Coffee operate only in few cities. How would you characterize these stores?

Accepted Answer

D

Question 2

In what sense is a firm in monopolistically competition a monopoly in its market?

Accepted Answer

In monopolistic competition, each firm sells a product that is differentiated from others, making it unique in the eyes of consumers. This differentiation can be based on quality, brand, or other features, giving the firm a degree of monopoly power over its particular product.

Question 3

Suppose Dar Al -Shorouk, the Beirut -based publishing company, is considering expanding its production of an already published book. Dar Al -Shorouk's managers want to estimate the marginal cost of production. How can they best do this?

Accepted Answer

Marginal cost is calculated by adding up the variable costs that change with the level of output (e.g., printing costs for additional books) and does not include fixed overheads like rent and editor's salaries.

Question 4

-Refer to Figure 9-4. The firm represented in the diagram is currently sellingQ_a units at a price of $P_a. Is this firm maximizing its profit and if it is not, what would you recommend to the firm?

Accepted Answer

Without access to Figure 9-4, the correct answer cannot be determined based on the provided information. However, the recommendation to adjust price and quantity suggests a strategy to align closer with marginal cost and marginal revenue principles for profit maximization, which is a common economic recommendation.

Question 5

You are planning to open a new Italian restaurant in your hometown where there are three other Italian restaurants. You plan to distinguish your restaurant from your competitors by offering northern Italian cuisine and using locally grown organic produce. What is likely to happen in the restaurant market in your hometown after you open?

Accepted Answer

The introduction of a new restaurant with distinct offerings (northern Italian cuisine and locally grown organic produce) increases the variety of options available to consumers. This makes consumers more sensitive to price changes since they have more alternatives to choose from, hence making the demand curve facing each restaurant owner more elastic.

Question 6

You have just opened a new Lebanese restaurant in your hometown where there are three other Lebanese restaurants. Your restaurant is doing a brisk business and you attribute your success to your distinctive northern Lebanese cuisine using locally grown organic produce. What is likely to happen to your business in the long run?

Accepted Answer

In the long run, the success of your restaurant is likely to attract new competitors, which will increase competition and drive profits down.

Question 7

-Refer to Figure 9 -6. The firm represented in the diagram makes

Accepted Answer

The firm makes zero economic profit when total revenue equals total cost, including both explicit and implicit costs. In the context of the diagram (which isn't visible here but typically represents a firm's cost and revenue structure), if a firm is covering all its costs (including opportunity costs), it's making zero economic profit, which is a normal condition for a perfectly competitive firm in the long run.

Question 8

-Refer to Figure 9 -6. What is the amount of excess capacity?

Accepted Answer

Without access to Figure 9-6, it's impossible to accurately determine the amount of excess capacity. The correct answer would depend on specific details provided in the figure, such as the levels of supply, demand, or capacity utilization depicted.

Question 9

In 1984 when Apple Computer introduced the Macintosh, it was able to sell the product at a hefty premium while comparable personal computers were priced at less than half the price of a Macintosh. Despite its much higher price, Apple was able to achieve a 15 percent market share. Which of the following contributed to Apple's initial success?

Accepted Answer

Apple's initial success was largely due to the strong differentiation of the Macintosh from its competitors, offering unique features and a user-friendly interface that justified the premium price.

Question 10

At the peak of its success in the mid -1980s to the early 1990s, Apple Computer commanded a 15 percent share of the personal computers market. During this period what happened to Apple's demand curve?

Accepted Answer

The answer of At the peak of its success in...

Question 11

At the peak of its success in the mid -1980s to the early 1990s, Apple Computer commanded a 15 percent share of the personal computers market. If iPad sales are included, Apple's share of the market was 10.8% in 2010.. Which of the following best accounts for its dwindling market share?

Accepted Answer

The answer of At the peak of its success in...

Question 12

Aramex is a worldwide provider of integrated supply-chain solutions. In the last 18 years, it has grown to compete with the big four of this industry: DHL, FedEx, UPS, and TNT. Aramex has a widespread presence and partial dominance of the express and postal market in the Middle East and North Africa region. This is an example of a ________ for Aramex.

Accepted Answer

Aramex's widespread presence and partial dominance in the express and postal market in the Middle East and North Africa region, allowing it to compete with major industry players like DHL, FedEx, UPS, and TNT, exemplifies a competitive advantage. This advantage is derived from its strong regional presence and capabilities that distinguish it from its competitors.

Question 13

How does the long run equilibrium of a monopolistically competitive industry differ from that of a perfectly competitive industry?

Accepted Answer

The answer of How does the long run equilibrium of...

Question 14

For allocative efficiency to hold,

Accepted Answer

Allocative efficiency occurs when the price of a good or service is equal to the marginal cost of producing that last unit, ensuring that resources are allocated in the most efficient manner across the economy.

Question 15

-Refer to Figure 9 -8. What is the amount of excess capacity?

Accepted Answer

Excess capacity refers to the difference between the quantity supplied at the price floor and the quantity demanded at that price. Without seeing Figure 9-8, the correct answer cannot be determined based on the provided options, as they are formatted in a nonsensical manner. However, the concept of excess capacity typically involves calculating the difference between quantities, which is what option D suggests by indicating a subtraction between two quantities.

Question 16

-Refer to Figure 9 -8. In the long run, why will the firm produce Q_funits and not Q_gunits, which has a lower its average cost of production?

Accepted Answer

In the long run, firms aim to maximize profit, which occurs where marginal cost equals marginal revenue. Producing at a quantity where the firm must sell below average cost would result in a loss, hence the firm will choose a production level where it can sell at or above average cost to ensure profitability.

Question 17

-Refer to Figure 9 -9. Which of the following statements is true?

Accepted Answer

The answer of 
-Refer to Figure 9 -9. Which of...

Question 18

-Refer to Figure 9 -9. The diagram demonstrates that

Accepted Answer

Monopolistic competitors cannot achieve productive efficiency due to product differentiation, which prevents them from producing at the minimum average total cost.

Question 19

A franchise is

Accepted Answer

A franchise is a firm with the legal right to sell a good or service in a particular area, typically granted by a franchisor.

Question 20

Coca -Cola has used Nancy Ajram to create the impression that Coca -Cola is superior to any other cola drink. Coca -Coal is attempting to

Accepted Answer

Using Nancy Ajram in their advertising, Coca-Cola aims to differentiate their product from competitors by associating it with a popular celebrity, suggesting that Coca-Cola is a superior choice. This strategy does not directly relate to production costs, pricing strategies, or promoting product similarity.

Quiz 9: Monopolistic Competition: The Competitive Model in a More Realistic Setting