Question 1

Describe why monopolistically competitive firms find it important to establish brand loyalty.

Accepted Answer

The answer of Describe why monopolistically competitive firms find it...

Question 2

Economists say that excess capacity in monopolistically competitive markets is "the cost to society of variety." What is the cost that economists are talking about, and why is this cost the result of having a variety of goods and services?

Accepted Answer

The answer of Economists say that excess capacity in monopolistically...

Question 3

A monopolistically competitive firm that runs a successful advertising campaign creates enormous goodwill, but this goodwill does little to increase the value of the company.

Accepted Answer

Goodwill generated from a successful advertising campaign can significantly increase the value of a company by enhancing its brand image, attracting more customers, and potentially allowing the company to charge higher prices for its products or services, thus increasing profitability.

Question 4

A monopolistically competitive firm maximizes profits in the short run and long run at an output level where marginal revenue equals marginal costs.

Accepted Answer

In the short run, a monopolistically competitive firm will maximize profits where marginal revenue equals marginal costs. In the long run, however, firms in monopolistic competition will continue to produce because they have differentiated products and face less competition than in a perfectly competitive market, leading to excess capacity and lower profits. Eventually, firms will adjust prices or innovate their products to remain competitive.

Question 5

Describe the typical demand curve facing an individual firm in perfectly competitive, monopoly, and monopolistically competitive markets.Explain what the shape of each firm's demand curve indicates about the amount of market power each firm possesses.

Accepted Answer

The answer of Describe the typical demand curve facing an...

Question 6

A successful advertising campaign alters the demand curve and the supply curve facing the firm.

Accepted Answer

A successful advertising campaign primarily alters the demand curve by increasing consumer awareness and preference for the product, which can lead to higher demand at each price level. It does not directly affect the supply curve, which is determined by factors such as production costs and technology.

Question 7

If monopolistically competitive firms have some control over the prices they charge, why do they experience zero economic profits in the long run?

Accepted Answer

The answer of If monopolistically competitive firms have some control...

Question 8

Discuss both the price elasticity of demand and the cross-price elasticity of demand conditions facing a firm in a monopolistically competitive industry.Include in your essay the role of advertising and the creation of brand loyalty.

Accepted Answer

The answer of Discuss both the price elasticity of demand...

Question 9

In 2008 Coca-Cola was the most valuable brand name.

Accepted Answer

In 2008, Coca-Cola was indeed the most valuable brand name according to the annual ranking by Interbrand.

Question 10

Describe the characteristics of a monopolistically competitive industry.

Accepted Answer

The answer of Describe the characteristics of a monopolistically competitive...

Quiz 12: Monopolistic Competition