Question 1

Perfect competitors and monopolistic competitors both earn _____ economic profit in the long run,but perfect competitors produce at the _____ of the ATC curve,while monopolistic competitors produce _____ of the ATC curve.

Accepted Answer

Both perfect competitors and monopolistic competitors earn zero economic profit in the long run due to the entry and exit of firms. However, perfect competitors produce at the minimum point of the average total cost (ATC) curve, where marginal cost equals ATC, while monopolistic competitors produce on the downward-sloping portion of the ATC curve, where marginal cost is less than ATC. This is because monopolistic competitors have some market power and can charge prices above marginal cost, but not as high as a pure monopoly.

Question 2

A monopolistic competitor will advertise to:

Accepted Answer

Monopolistic competitors have some degree of control over the price of their product, but face competition from similar products. By advertising, they can differentiate their product and create brand loyalty, leading to increased demand for their product.

Question 3

In the long run,perfect competitors and monopolistic competitors are similar in that they:

Accepted Answer

Both perfect competitors and monopolistic competitors aim to produce at the output level where price equals average total cost (P = ATC) to maximize profits in the long run. However, perfect competitors also set the price at the point where marginal revenue equals marginal cost (MR = MC) while monopolistic competitors set a price higher than marginal cost but lower than the maximum consumers are willing to pay. Both types of competitors do not earn a positive economic profit in the long run as new firms can easily enter the market and reduce profits. Additionally, perfect competitors produce a standardized product while monopolistic competitors produce a differentiated product.

Question 4

Use the following to answer questions :
Figure: Monopolistic Competitor 
-(Figure: Monopolistic Competitor)Use Figure: Monopolistic Competitor.If the firm shown in the figure produces at its profit-maximizing level,it will produce:

Accepted Answer

In monopolistic competition, firms often do not produce at the minimum point of their average total cost (ATC) curve, which is where they would be fully utilizing their capacity. Instead, they produce at a level where marginal revenue (MR) equals marginal cost (MC), which typically occurs on the downward-sloping portion of the ATC curve, indicating that they are not producing at full capacity and thus have excess capacity.

Question 5

Both monopolists and monopolistic competitors:

Accepted Answer

Both monopolists and monopolistic competitors charge a price that is greater than the marginal cost of production. A is incorrect because monopolistic competition can result in zero economic profits in the long run. B is also incorrect because while monopolists have high barriers to entry, monopolistic competitors have relatively low barriers to entry. D is incorrect because monopolistic competitors offer products that have substitutes, but they are differentiated in some way from their competitors' products.

Question 6

Use the following to answer questions :
Figure: Monopolistic Competitor 
-(Figure: Monopolistic Competitor)Use Figure: Monopolistic Competitor.The firm shown in the figure may engage in advertising because:

Accepted Answer

The firm may engage in advertising because its price is greater than its MC. This indicates that the firm has some market power and may be able to increase its profits by differentiating its product through advertising.

Quiz 15: Monopolistic Competition

Perfect competitors and monopolistic competitors both earn ___ economic profit in the long run,but perfect competitors produce at the _ of the ATC curve,while monopolistic competitors produce ___ of the ATC curve.

A monopolistic competitor will advertise to:

In the long run,perfect competitors and monopolistic competitors are similar in that they:

Use the following to answer questions : Figure: Monopolistic Competitor -(Figure: Monopolistic Competitor) Use Figure: Monopolistic Competitor.If the firm shown in the figure produces at its profit-maximizing level,it will produce:

Both monopolists and monopolistic competitors:

Use the following to answer questions : Figure: Monopolistic Competitor -(Figure: Monopolistic Competitor) Use Figure: Monopolistic Competitor.The firm shown in the figure may engage in advertising because: