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Exam 16: Monopolistic Competition

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Question 201

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Entry of new firms in monopolistically competitive industries can convey a negative externality on producers because firms lose customers and profits from the entry of new competitors. This externality is called the

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Question 202

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Figure 16-11 -Refer to Figure 16-11. How much consumer surplus will be derived from the purchase of this product at the monopolistically competitive price?

A) $250.
B) $500
C) $562.50.
D) $1250.

E) B) and C)
F) B) and D)

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Question 203

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The deadweight loss that is associated with a monopolistically competitive market is a result of

The two types of imperfectly competitive markets are

Figure 16-12 -Refer to Figure 16-12. Does this monopolistically competitive market produce the welfare-maximizing level of output?

Table 16-7 A monopolistically competitive firm faces the following demand schedule for its product. In addition, the firm has total fixed costs equal to 20. -Refer to Table 16-7. If the firm has a constant marginal cost of $7 per unit, what price should the firm charge to maximize profit?

Figure 16-13 -Refer to Figure 16-13. Use the letters to identify the area of profit for this firm.

Use a graph to demonstrate why a profit-maximizing monopolistically competitive firm must operate at excess capacity. Explain why a perfectly competitive firm is not subject to the same constraint.

Figure 16-3 This figure depicts a situation in a monopolistically competitive market. -Refer to Figure 16-3. How much consumer surplus will be derived from the purchase of this product at the monopolistically competitive price?

Hotels in New York City frequently experience an average vacancy rate of about 20 percent (i.e., on an average night, 80 percent of the hotel rooms are full) . This kind of excess capacity is indicative of what kind of market?

Suppose the point of tangency that characterizes long-run equilibrium for a monopolistically competitive firm occurs at Q₁ units of output. This level of output, Q₁,

Which of these types of firms can earn a positive economic profit in the long run?

Figure 16-12 -Refer to Figure 16-12. Compare the price and marginal cost in this market with price and marginal cost if this were a perfectly competitive market.

Figure 16-14 -Refer to Figure 16-14. Which letter identifies the profit-maximizing level of output for this firm?

Table 16-4 This table shows the demand schedule, marginal cost, and average total cost for a monopolistically competitive firm. -Refer to Table 16-4. If the government forces this firm to produce at its efficient output level, how much profit will this firm earn?

Considering perfect competition, monopolistic competition, and monopoly, which of the market structures results in production of the welfare-maximizing level of output?

A monopolistically competitive market could be considered inefficient because

Scenario 16-3 Peter operates an ice cream shop in the center of Fairfield. He sells several unusual flavors of organic, homemade ice cream so he has a monopoly over his own ice cream, though he competes with many other firms selling ice cream in Fairfield for the same customers. Peter's demand and cost values for sales per day are given in the table below. (Everyone who purchases Peter's ice cream buys a double scoop cone because it's so delicious.) -Refer to Scenario 16-3. How much profit will Peter earn each day if he chooses the price and quantity that maximize his profit?

Figure 16-13 -Refer to Figure 16-13. Use the letters to identify the area of profit for this firm.

According to one theory, advertising sends a signal to consumers about the quality of the product being offered. An implication of this theory is that