Principles of Microeconomics (MindTap Course List)
8th Edition
ISBN: 9781305971493
Author: N. Gregory Mankiw
Publisher: Cengage Learning
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Question
Chapter 16, Problem 5CQQ
To determine
Long run equilibrium in a monopolistic competition .
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Monopolistically competitive firms use product differentiation to
a.limit the number of firms in the industry.
b.ensure long-run profits.
c.achieve market power.
d.block other firms from entering the industry.
The cost of producing a tube of tooth paste is $0.05. If the market for tooth paste is monopolistically competitive, a manufacturer who charges $0.05 for each bottle will ________.
a.
exit the industry in the long run
b.
earn zero economic profits in the short run
c.
incur a loss in the short run
d.
shut down production in the short run
If a monopolistically competitive industry is earning short-run positive economic profits, what do we expect to happen in the long run?
a
Existing firms will exit.
b
New firms will enter.
c
The industry will be regulated.
d
Firms will collude to keep prices high.
Chapter 16 Solutions
Principles of Microeconomics (MindTap Course List)
Ch. 16.1 - Prob. 1QQCh. 16.2 - Prob. 2QQCh. 16.3 - Prob. 3QQCh. 16 - Prob. 1CQQCh. 16 - Prob. 2CQQCh. 16 - Prob. 3CQQCh. 16 - Prob. 4CQQCh. 16 - Prob. 5CQQCh. 16 - If advertising makes consumers more loyal to...Ch. 16 - Prob. 1QR
Ch. 16 - Prob. 2QRCh. 16 - Prob. 3QRCh. 16 - Prob. 4QRCh. 16 - How might advertising reduce economic well-being?...Ch. 16 - Prob. 6QRCh. 16 - Prob. 7QRCh. 16 - Prob. 1PACh. 16 - Prob. 2PACh. 16 - Prob. 3PACh. 16 - Prob. 4PACh. 16 - Prob. 5PACh. 16 - Prob. 6PACh. 16 - Prob. 7PACh. 16 - Prob. 8PACh. 16 - Prob. 9PACh. 16 - Sleek Sneakers Co. is one of many firms in the...
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- What is the first item to identify when determining the short-run equilibrium for a monopolistically competitive firm? a. the total profits b. the total revenue C. the total costs d. the profit-maximizing level of outputarrow_forwardWhich of the following is not true of a monopolistically competitive firm? a. The firm will not likely earn an economic profit in the long run. b. The firm will maximize profits by producing where MR = MC. c. The firm will produce an efficient quantity where average total cost is minimized.arrow_forwardA. How does the demand curve faced by the firm in monopolistically competitive market differ from the demand curve faced by a firm participating in a purely competitive market? b. How does that impact how the firm sets its price and the quantity the firm produces?arrow_forward
- Assume a monopolistically competitive firm encounters a decrease in average variable cost at all output levels.We would expect: a. The price to rise and output to rise b. The price to fall and output to fall c. The price to rise and output to fall d. The price to fall and output to risearrow_forwardPart II | The graph below shows a monopolistically competitive firm in the short run. Price and Cost 8 9 8 20 0 100 MR 200 300 400 500 600 700 800 Output MC 9. What is the firm's profit-maximizing price and quantity? 10. How much profit does that firm make at that price and quantity? 900 ATC -d-parrow_forwardIf a firm is operating in a monopolistically competitive market, then in the long run: A. the firm will maximize its profit by producing the output level at which the marginal revenue is minimized. B. the firm will earn zero economic profit. C. the firm will maximize its profit by producing the output level at which the average cost is minimized. D. all of the abovearrow_forward
- In monopolistic competition, a firm has some ability to affect the price for its product because of Select one a. economic profits. b.easy entry and exit. C. many competitors product differentlation.arrow_forwardA photocopy shop in a monopolistically competitive market could daily sell 17,600 copies at a price of 4 cents, or it could sell 26,400 copies at a price of 3 cents. a. The marginal revenue associated with this range of the business's demand curve is____ cent(s). b. Draw the relevant range of this business's demand curve and identify a point on its marginal revenue curve.arrow_forwardMonopolistically competitive firms are considered inefficient in allocating society’s resources for which of the following reasons? Group of answer choices a. Firms exhibit significant market power and therefore the number of firms in the industry is strictly limited. b. In equilibrium, the marginal benefit exceeds the price charged by the firms. c. In long-run equilibrium, the firm is earning economic profits. d. In equilibrium, the marginal benefit exceeds the marginal cost of production. e. In equilibrium, the marginal benefit exceeds the marginal cost of production.arrow_forward
- II. The figure is drawn for a monopolistically competitive firm. PRICE 140 123.33 90 56.67 100 133.33 QUANTITY MC ATC Demand MR Refer to the figure above and explain: A). In order to maximize its profit, how many units the firm will choose to produce? 100 B). When the firm is maximizing its profit, the markup over marginal cost amounts to 50 C). The firm's maximum profit is D). Efficient scale is reached beyond which level of units? 133.33arrow_forwardThe demand curve for a monopolistically competitive firm is downward sloping because Group of answer choices a. it is easy for firms to enter or exit the market b. there are a large number of firms c. the marginal cost rises as output produced increases d. the product is produced by using scarce resources e. the products produced by different firms are not identicalarrow_forwardDE Quantity MC MR ATC Demand The graph above represents a firm in a monopolistically competitive market. Which of the following is true? The firm's profit-maximizing quantity is E. The firm is making a profit of (A - B) x D. The firm is making zero economic profits. The firm is making a loss of (A - B) x D.arrow_forward
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