Micro Economics For Today
10th Edition
ISBN: 9781337613064
Author: Tucker, Irvin B.
Publisher: Cengage,
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Question
Chapter P3, Problem 8KC
To determine
The long run profit of the monopolistically competitive firm.
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Which of the following statements is correct?
a. In the long run, both perfectly competitive firms and monopolistically competitive firms operate with excess capacity.
b. A firm operates with excess capacity when, in the long run, its level of output is below the efficient scale.
c. For any firm, efficient scale is the level of output at which the average-total-cost curve is tangent to the demand curve.
d. All of the above are correct.
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 Amazon sells dozens of similar types of pencils at slightly different prices, we might assume the pencil market is _________.
Select one:
a. an oligopoly.
b. a monopolistically competitive market.
c. a monopoly.
d. a perfectly competitive market.
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- If short-run economic profits are greater than zero for firms in a monopolistically competitive market, in the long run we expect: A. competing firms to enter the market and sell similar products. B. profits to increase. C. the demand curve for firms in the market to shift to the right. D. entry barriers to prevent competing firms from entering this market.arrow_forwardWhen firms in monopolistic competition are making an economic profit, firms will a.enter the industry, and demand will decrease for the original firms. b.enter the industry and then will exit the industry c.enter the industry, and demand will increase for the original firms. d.exit the industry, and demand will increase for the firms that remain.arrow_forwardMonopolistically competitive firms in the long run will do which of the following? They will produce where average cost is ________ than minimum average cost and earn ____________. a. higher; economic profitsb. lower; normal profitsc. lower; economic profitsd. higher; normal profitsarrow_forward
- a. b. C. d. Price panel a panel b panel c panel di Price (a) (c) MA MC MR ATC Quantity MC ATC D Quantity Price Price (b) MR (d) MC Quantity MC مما ATC Refer to Figure 3. Assume a monopolistic competitive environment: From the 4 graphs depicted, which one of them represents a short-run equilibrium that encourages the entry of other firms? ATC Quantity Darrow_forwardA perfectly competitive firm is onsidered to be more generous in terms of price and quantity of output in comparison to firm belonged to monopoly and monopolistic markets. C. If firms incurring loss in this market begin to exit the market, what will happen to the market equilibrium? Demonstrate your answer using a simplified graph. d. The firm wishes to supply output more than the quantity determined under the equilibrium condition, is it worth to pursue?arrow_forwardA firm is operating in the United States with only two other competitors in the industry. a. It is likely this industry would be characterized as: multiple choice 1 perfectly competitive. pure monopoly. monopolistically competitive. oligopoly. b. Firms in this industry will likely earn: multiple choice 2 an economic loss. an economic profit. a normal profit. c. If foreign firms begin supplying the product, increasing the number of competitors, it is likely that: multiple choice 3 economic profits will increase. economic losses will become smaller. economic profits will fall. normal profits will increase.arrow_forward
- Which of the following is true regarding monopolistic competition? Ⓒa. Each firm behaves as a monopolist, but makes no profits in the long run due to competition from close substitutes b. Save your money, and only purchase the railroads and high-end properties on the board (i.e. red, yellow, green, and blue) c. There is no such thing as monopolistic competition, it is an oxymoron d. Firms behave competitively, but they make profits in the long run because there are some barriers preventing entrepreneurs from entering the marketarrow_forwardWhat effect does the entry of new firms have on the economic profits of existing firms? When new firms enter a monopolistically competitive market, the economic profits of existing firms A. will decrease because their demand curves will shift to the left. B. will remain unchanged because they sell differentiated products. C. will increase because their demand curves will become more elastic. D. will decrease because their demand curves will shift to the right. E. will increase because their average cost of production will decrease. Click to select your answer and then click Check Answer.arrow_forwardMonopolistically competitive firms: A. incur losses in both the short run and long run. B. may realize either profits or losses in the short run, but realize normal profits (zero economic profits) in the long run. C. realize economic profits in both the short run and long run. D. realize normal profits (zero economic profits) in the short run but losses in the long run.arrow_forward
- In monopolistic competition,a firm produces 10,000 units when its marginal revenue equals its marginal cost. At this level of output, the firms average variable cost is $4.30 and its average fixed cost is $2.10. If the firm sells the product for $5 each, at best it is earning a. losses of $7,000. b. a profit of $7,000. c. losses of $14,000. d. a profit of $14,000. e. There is not enough information provided to answer this question.arrow_forwardWhen monopolistically competitive firms earn ________ profits, other firms ________ the industry in the long run. a. normal; exit b. positive economic; enter c. negative economic; enter d. normal; enterarrow_forwardThe feature that distinguishes monopolistic competition from perfect competition is that monopolistically competitive firms are a. able to differentiate their products. b. price takers. c. large relative to the market. d. able to block the entry of other firms.arrow_forward
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