Explain the role of advertising in monopolistic competition. Describe how advertising by all firms in a monopolistically competitive industry impacts a firm's Average Total Cost curve, its Marginal Cost curve, its demand curve, and its Marginal Revenue curve.

If a manufacturer of road bikes operates is a monopolistically competitive market, what does it mean about the products offered by itself and its competitors? Manufacturers offer an array of products that are distinctly similar in a particular way. Manufacturers offer an array of products that are virtually identical on the competition spectrum. Manufacturers offer an array of products that are at opposite ends of the competition spectrum. Manufacturers offer an array of products that are distinctly different in a particular way.

a) Can the threat of a price war deter entry by potential competitors? What actions might a firm take to make this threat credible?  b)Why is the firm’s demand curve flatter than the total market demand curve in monopolistic competition? Suppose a monopolistically competitive firm is making a profit in the short run. What will happen to its demand curve in the long run?

Suppose that a firm produces tennis racquets in a monopolistically competitive market. The following graph shows its demand curve (D), marginal revenue curve (MR), marginal cost curve (MC), and long-run average cost curve (LRAC). Assume that all firms in the industry face the same cost structure. Place the tan point (dash symbol) on the graph to indicate the long-run monopolistically competitive equilibrium price and quantity for this firm. Next, place the purple point (diamond symbol) to indicate the point at which this firm would produce in the long run if it operated in a perfectly competitive market. Note: Dashed drop lines will automatically extend to both axes. 100 LRAC 60 50 PRICE, COSTS, AND REVENUE (Dollars per racquet) 8 R 90 MC 10 0 0 10 D MR 50 60 70 80 90 100 20 30 40 QUANTITY (Thousands of racquets per month) Monopolistic Competition Outcome Perfect Competition Outcome Compare the average cost and the output in the long-run equilibrium for a monopolistically competitive…

The diagram above represents a monopolistically competitive firm. Answer the questions below.  Is this firm operating in the short-run or long-run? How do you know?  Calculate this firm’s accounting profit.  From the diagram, what is the productively efficient output for this firm?  From the diagram, economies of scale are maximized at which output level? Explain.  From the diagram, what is the allocatively efficient output for this firm? Explain.

Which of the following is a characteristic of monopolistic competition? Group of answer choices Same products Competition only over price Easy entry and exit. One firm

The following graph represents a monopolistically competitive firm in long-run equilibrium. Place the black point (cross sign) on the graph to indicate the short-run profit-maximizing price and quantity for this monopolistically competitive company. Next, place the grey star on the graph to indicate the point where the LRAC reaches a minimum. PRICE PER UNIT (Dollars) 500 450 400 350 300 250 200 150 100 50 MC 0 0 50 LRAC MR Demand 100 150 200 250 300 350 400 450 500 QUANTITY (Units) Monopolistically Competitive Outcome Minimum of the LRAC The long-run equilibrium price is $ (Hint: Use the graph to find the numeric value of the price at equilibrium.) The long-run equilibrium quantity is units. The LRAC curve is at its minimum at a quantity of The long-run equilibrium price is units. the marginal cost of producing the equilibrium output. ?

Suppose that a company operates in the monopolistically competitive market for denim jackets. The following graph shows the demand curve, marginal revenue (MR) curve, marginal cost (MC) curve, and average total cost (ATC) curve for the firm. Place a black point (plus symbol) on the graph to indicate the long-run monopolistically competitive equilibrium price and quantity for this firm. Next, place a grey point (star symbol) to indicate the minimum average total cost the firm faces and the quantity associated with that cost. PRICE (Dollars per jacket) 100 90 80 50 ATC 30 2 8 8 2 2 2 2 ° 60 MC MR Demand 0 + 0 10 20 30 40 50 60 70 80 90 100 QUANTITY (Thousands of jackets) Mon Comp Outcome Min Unit Cost (?)

The practice of product differentiation in the monopolistic competition market enables firms to compete in three areas. What are these areas?

The graph shows the short-run cost, revenue, and perceived demand curves for all firms in the convenience store market, which is a monopolistically competitive market. Price ($) Marginal cost Number of firms will remain the same. Number of firms will decrease to one firm. Number of firms will increase. Number of firms will decrease. Demand Quantity What will happen to the number of firms in the industry as it moves from the short run to the long run? Average cost Marginal revenue