Question 1

Which of the following are products that differ from each other enough that they can be sold at different prices,but are similar enough that they can be considered the same product?

Accepted Answer

Differentiated products are similar enough in nature that they can be considered the same product, but they differ enough in features, quality, or branding that they can be sold at different prices. Examples include different brands of clothing or cars.

Question 2

The diagram below shows selected cost and revenue curves for a firm in a monopolistically competitive industry.  FIGURE 11-1
-Refer to Figure 11-1.What price will this profit-maximizing firm set?

Accepted Answer

The answer of The diagram below shows selected cost and...

Question 3

When a monopolistically competitive industry is in long-run equilibrium,each firm will be operating where price is

Accepted Answer

In long-run equilibrium, a monopolistically competitive firm sets price equal to average total cost (ensuring zero economic profit) and greater than marginal cost (due to downward-sloping demand and some market power).

Question 4

A monopolistically competitive firm has some degree of market power because

Accepted Answer

A monopolistically competitive firm sells a differentiated product, meaning it has some degree of market power as consumers may perceive its product as unique or superior to other products in the market. This allows the firm to have some control over the price it charges for its product. However, this market power is limited by the presence of other firms selling substitute products. Therefore, the firm may not always make positive profits as it still faces competition in the market. There are no natural or legal barriers to entry in a monopolistically competitive market.

Question 5

The diagram below shows selected cost and revenue curves for a firm in a monopolistically competitive industry.  FIGURE 11-1
-Refer to Figure 11-1.What quantity of output will this profit-maximizing firm choose to sell?

Accepted Answer

The profit-maximizing firm will choose the quantity where marginal cost equals marginal revenue. Without the figure, we assume that this occurs at 100 units based on typical textbook examples.

Question 6

The diagram below shows selected cost and revenue curves for a firm in a monopolistically competitive industry.  FIGURE 11-1
-Refer to Figure 11-1.Assuming this firm is producing its profit-maximizing level of output,what is the per-unit profit being earned by this firm?

Accepted Answer

The per-unit profit is calculated by subtracting the average total cost from the price at the profit-maximizing output level. If the figure indicates that the price is $25 and the average total cost is $20, then the per-unit profit is $5.

Question 7

FIGURE 11-2
-Refer to Figure 11-2.In diagram B,at the short-run profit-maximizing position,the firm

Accepted Answer

The answer of  FIGURE 11-2
-Refer to Figure 11-2.In diagram...

Question 8

In long-run equilibrium,a monopolistically competitive industry is characterized by

Accepted Answer

In the long-run equilibrium of monopolistically competitive industry, firms are achieving zero economic profits. This happens because in the long run, firms can freely enter or exit the industry, which leads to an increase in competition and a decrease in demand for each individual firm, reducing their market power and profits. Therefore, option C is the correct answer. Option A is incorrect because in the long-run, firms cannot sustain positive profits. Option B is incorrect because a monopolistically competitive firm faces a downward-sloping demand curve, meaning it cannot have a perfectly elastic demand curve. Option D is incorrect because monopolistic competition does not have barriers to entry. Option E is incorrect because not all firms will necessarily have the same minimum point on the long-run average cost curve.

Question 9

The diagram below shows selected cost and revenue curves for a firm in a monopolistically competitive industry.  FIGURE 11-1
-Refer to Figure 11-1.Assuming that this firm is producing its profit-maximizing level of output,what are the profits or losses being earned by this firm?

Accepted Answer

The answer of The diagram below shows selected cost and...

Question 10

One prediction about monopolistic competition is that it has higher unit costs than perfect competition.But it is unreasonable to conclude that monopolistic competition is therefore bad for consumers because

Accepted Answer

Monopolistic competition offers consumers a greater variety of products, which can enhance consumer satisfaction despite potentially higher unit costs.

Question 11

FIGURE 11-2
-Refer to Figure 11-2.In diagram B,the firm's short-run supply curve is

Accepted Answer

In the short run, the supply curve of a firm is determined by its marginal cost (MC) because output can only be increased or decreased by changing variable inputs, which affects marginal cost. Diagram B shows that the firm's short-run supply curve is MC above AVC, as it is the portion of the MC curve that lies above the AVC curve. The firm will only supply output at a price that is greater than or equal to its average variable cost (AVC) to cover its variable costs and some portion of its fixed costs.

Question 12

FIGURE 11-2
-Refer to Figure 11-2.Diagram C depicts a typical firm in long-run equilibrium in

Accepted Answer

In long-run equilibrium, a firm in a perfectly competitive industry will produce at a point where price equals marginal cost and average total cost, resulting in zero economic profit. Diagram C likely depicts this scenario.

Question 13

Consider an industry that is monopolistically competitive.In such a market,

Accepted Answer

In a monopolistically competitive market, firms can set prices for their products but they are constrained by the existence of close substitutes. This means that if a firm raises its price too much, consumers will switch to a similar product offered by another firm. As a result, firms have some price-setting ability but not complete control over the market. Therefore, choice (C) is the best answer.

Question 14

FIGURE 11-2
-Refer to Figure 11-2.A perfectly competitive firm with zero economic profits is depicted in diagram

Accepted Answer

Diagram C shows the firm producing at the point where price equals marginal cost, which is the efficient output level in a perfectly competitive market. At this output level, the firm earns zero economic profits. Diagrams A, B, D, and E all depict a situation where the firm is earning economic profits, so they are not the best choice.

Question 15

A monopolistically competitive firm is predicted to earn positive profits

Accepted Answer

In the short run, a monopolistically competitive firm can make positive profits because it has some degree of control over its price due to its differentiated product, but in the long run, other firms can enter the market and compete away those profits. So, monopolistically competitive firms can only make profits in the short run. The other options do not accurately explain why a monopolistically competitive firm might earn positive profits.

Question 16

FIGURE 11-2
-Refer to Figure 11-2.The position of a typical firm when the industry is in long-run equilibrium with free entry and exit and product differentiation is exhibited in diagram

Accepted Answer

The answer of  FIGURE 11-2
-Refer to Figure 11-2.The position...

Question 17

FIGURE 11-2
-Refer to Figure 11-2.Diagram D depicts the only possible long-run equilibrium for a typical firm in

Accepted Answer

Diagram D depicts the long-run equilibrium for a typical firm in a monopolistically competitive industry. In this market structure, firms have some market power as they differentiate their products, but there are also many competitors. The equilibrium quantity is where marginal revenue equals marginal cost, and the equilibrium price is higher than the perfectly competitive price due to the product differentiation. The firm earns normal profits in the long run.

Question 18

A good example of a monopolistically competitive firm is
1)The Gap clothing store.
2)a neighbourhood drycleaner.
3)a Prince Edward Island potato farmer.

Accepted Answer

A monopolistically competitive firm is one that operates in an industry with a large number of firms, each selling differentiated products. The Gap clothing store and a neighborhood dry cleaner both sell products that are slightly differentiated from their competitors, making them good examples of monopolistically competitive firms. The Prince Edward Island potato farmer, however, is likely operating in a perfectly competitive market, where all firms sell identical products.

Question 19

FIGURE 11-2
-Refer to Figure 11-2.In diagram D,the profit-maximizing output for a single-price monopolist occurs where

Accepted Answer

The answer of  FIGURE 11-2
-Refer to Figure 11-2.In diagram...

Question 20

FIGURE 11-2
-Refer to Figure 11-2.In diagram A,the profit-maximizing output for a competitive firm is one where

Accepted Answer

In a competitive market, a firm will maximize its profit by producing the quantity where P = AR = MC. This is because in a perfectly competitive market, firms are price takers and they must sell their output at the prevailing market price (P = AR). In order to maximize profit, the firm will produce the quantity where the additional revenue gained from producing one more unit (MR) is equal to the additional cost of producing that unit (MC). This occurs at the intersection of the firm's marginal cost curve and the market demand curve (P = MC). Therefore, the profit-maximizing output for a competitive firm is where P = AR = MC.

Quiz 11: Imperfect Competition and Strategic Behaviour

Which of the following are products that differ from each other enough that they can be sold at different prices,but are similar enough that they can be considered the same product?

The diagram below shows selected cost and revenue curves for a firm in a monopolistically competitive industry. FIGURE 11-1 -Refer to Figure 11-1.What price will this profit-maximizing firm set?

When a monopolistically competitive industry is in long-run equilibrium,each firm will be operating where price is

A monopolistically competitive firm has some degree of market power because

The diagram below shows selected cost and revenue curves for a firm in a monopolistically competitive industry. FIGURE 11-1 -Refer to Figure 11-1.What quantity of output will this profit-maximizing firm choose to sell?

The diagram below shows selected cost and revenue curves for a firm in a monopolistically competitive industry. FIGURE 11-1 -Refer to Figure 11-1.Assuming this firm is producing its profit-maximizing level of output,what is the per-unit profit being earned by this firm?

FIGURE 11-2 -Refer to Figure 11-2.In diagram B,at the short-run profit-maximizing position,the firm

In long-run equilibrium,a monopolistically competitive industry is characterized by

The diagram below shows selected cost and revenue curves for a firm in a monopolistically competitive industry. FIGURE 11-1 -Refer to Figure 11-1.Assuming that this firm is producing its profit-maximizing level of output,what are the profits or losses being earned by this firm?

One prediction about monopolistic competition is that it has higher unit costs than perfect competition.But it is unreasonable to conclude that monopolistic competition is therefore bad for consumers because

FIGURE 11-2 -Refer to Figure 11-2.In diagram B,the firm's short-run supply curve is

FIGURE 11-2 -Refer to Figure 11-2.Diagram C depicts a typical firm in long-run equilibrium in

Consider an industry that is monopolistically competitive.In such a market,

FIGURE 11-2 -Refer to Figure 11-2.A perfectly competitive firm with zero economic profits is depicted in diagram

A monopolistically competitive firm is predicted to earn positive profits

FIGURE 11-2 -Refer to Figure 11-2.The position of a typical firm when the industry is in long-run equilibrium with free entry and exit and product differentiation is exhibited in diagram

FIGURE 11-2 -Refer to Figure 11-2.Diagram D depicts the only possible long-run equilibrium for a typical firm in

A good example of a monopolistically competitive firm is 1) The Gap clothing store. 2) a neighbourhood drycleaner. 3) a Prince Edward Island potato farmer.

FIGURE 11-2 -Refer to Figure 11-2.In diagram D,the profit-maximizing output for a single-price monopolist occurs where

FIGURE 11-2 -Refer to Figure 11-2.In diagram A,the profit-maximizing output for a competitive firm is one where