Question 1

NARRBEGIN: Exhibit 10-12
Exhibit 10-12
 
-The profit-maximizing (or loss-minimizing) price the firm would charge in Exhibit 10-12 is

Accepted Answer

The answer of NARRBEGIN: Exhibit 10-12
Exhibit 10-12
 
-The profit-maximizing (or...

Question 2

In the long run in monopolistic competition, all economies of scale are exhausted.

Accepted Answer

The answer of In the long run in monopolistic competition,...

Question 3

Which of the following characteristics does perfect competition share with monopolistic competition?

Accepted Answer

The answer of Which of the following characteristics does perfect...

Question 4

Which of the following is inconsistent with the model of perfect competition?

Accepted Answer

Advertising product differences is inconsistent with the model of perfect competition as in perfect competition, all firms sell identical products and there is no need for advertising.

Question 5

The video rental market can be described as a monopolistically competitive market. As a result of the economic profit earned by the first video rental outlets,

Accepted Answer

In a monopolistically competitive market, firms can earn economic profit in the short run. This attracts new firms to enter the market, which increases competition and reduces economic profit in the long run. Therefore, choice B is the best answer as it describes the entry of competitors into the video rental market, reducing the economic profit earned by existing firms. The other choices are not relevant to the characteristics of a monopolistically competitive market.

Question 6

Excess capacity is defined as the difference between a firm's maximum possible output and its actual output.

Accepted Answer

The answer of Excess capacity is defined as the difference...

Question 7

Which of the following is true of the relationship between price and marginal cost under monopolistic competition?

Accepted Answer

The answer of Which of the following is true of...

Question 8

Suppose that firms in a monopolistically competitive industry are earning short-run economic profits. In the long run, the demand curve facing each individual firm can be expected to

Accepted Answer

In the long run, new firms will enter the industry, increasing competition and shifting the demand curve to the left. Additionally, as more firms enter the industry, the products become more substitutable, making the demand curve for each individual firm more elastic or flatter.

Question 9

NARRBEGIN: Exhibit 10-12
Exhibit 10-12
 
-The profit-maximizing (or loss-minimizing) output for the firm in Exhibit 10-12 is

Accepted Answer

The answer of NARRBEGIN: Exhibit 10-12
Exhibit 10-12
 
-The profit-maximizing (or...

Question 10

Monopolistically competitive firms

Accepted Answer

Monopolistically competitive firms can earn short-run economic profit due to differentiated products and some market power, but in the long run, new firms can enter the market, creating competition and reducing demand for existing firms. This leads to a decrease in economic profit and a tendency towards zero long-run economic profit.

Question 11

If the demand curve facing the Acme Awl Company is tangent to its average total cost curve, all of the following statements are true except one. Which is the exception?

Accepted Answer

If the demand curve facing the Acme Awl Company is tangent to its average total cost curve, it indicates that the firm is producing at the point of minimum efficient scale where it is experiencing constant returns to scale. This means that the firm is earning only a normal profit (not economic profit) and there is no excess capacity. However, it does not necessarily mean that marginal cost must exceed marginal revenue. In fact, at the point where the demand curve is tangent to the ATC curve, marginal cost and marginal revenue are equal.

Question 12

In which of the following market structures is a firm most likely to advertise extensively and fear entry of new firms?

Accepted Answer

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

Question 13

NARRBEGIN: Exhibit 10-12
Exhibit 10-12
 
-At the profit-maximizing (or loss-minimizing) output and price, the firm in Exhibit 10-12 would

Accepted Answer

At the profit-maximizing (or loss-minimizing) output and price, the firm's total revenue just covers its total cost, including both variable and fixed costs. This means the firm is earning zero economic profit, or breaking even. Therefore, choice A is the correct answer.

Question 14

As new monopolistically competitive firms enter the market, the demand facing each firm __________, causing the price charged by each firm to __________. In the long run, each firm will earn a __________ profit.

Accepted Answer

The answer of As new monopolistically competitive firms enter the...

Question 15

In the long run in monopolistic competition, a firm will not produce the output level that minimizes average cost because

Accepted Answer

The answer of In the long run in monopolistic competition,...

Question 16

In the long-run, firms in a monopolistically competitive market earn zero economic profit.

Accepted Answer

In the long-run, firms in a monopolistically competitive market will face competition from other firms offering similar products, leading to a decrease in demand and pricing power. This forces firms to lower their prices and reduces their ability to earn economic profit, eventually reaching a point where firms only earn enough to cover their costs and earn zero economic profit.

Question 17

In the long run, economic profit for a monopolistically competitive firm

Accepted Answer

The answer of In the long run, economic profit for...

Question 18

In the long-run, both perfectly competitive and monopolistically competitive firms will produce at minimum average cost.

Accepted Answer

In the long-run, both perfectly competitive and monopolistically competitive firms will produce at minimum average cost because firms have time to adjust their production processes and adopt cost-saving technologies. In a perfectly competitive market, firms are forced to produce at minimum average cost in order to stay competitive. In a monopolistically competitive market, firms have some pricing power due to differentiation, but they still face competition from similar products, which motivates them to keep their costs as low as possible.

Question 19

In the long run, a monopolistically competitive firm will find

Accepted Answer

The answer of In the long run, a monopolistically competitive...

Question 20

In the short-run, firms in a monopolistically competitive market will earn zero economic profit.

Accepted Answer

In the short-run, firms in monopolistically competitive markets can earn positive economic profit or incur losses. This is because they have some degree of control over the price they charge due to product differentiation, but still face competition from other firms in the market. However, in the long-run, economic profits will be driven to zero due to the entry of new firms attracted by the potential profits.

Quiz 10: Monopolistic Competition and Oligopoly

NARRBEGIN: Exhibit 10-12 Exhibit 10-12 -The profit-maximizing (or loss-minimizing) price the firm would charge in Exhibit 10-12 is