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Exam 13: Monopolistic Competition

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Question 71

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Communist central planners didn’t care about product differentiation, opting instead for a uniform design of products in order to achieve

A) higher prices and profits for their firms.
B) mass production and lower costs.
C) allocative efficiency in society.
D) purely competitive markets.

E) A) and D)
F) A) and C)

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Question 72

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Answer the question on the basis of the following demand and cost data for a specific firm. $\quad$$\quad$$\quad$$\quad$$\text { Demand Data }$ $\quad$$\quad$$\quad$ $\text { Cost Data }$ $\begin{array}{|c|c|c|c|c|}\hline&&(3) &\text { Total } \\\text { (1) } & \text { (2) } & \text { Quantit } & \text { Output } & \text { Total } \\\text { Price } & \text { Price } & \text { Y} & & \text { Cost }\\\hline \$ 50 & \$ 35 & 2 & 2 & \$ 45 \\\hline 45 & 30 & 3 & 3 & 55 \\\hline 40 & 25 & 4 & 4 & 70 \\\hline 35 & 20 & 5 & 5 & 90 \\\hline 30 & 15 & 6 & 6 & 115 \\\hline 25 & 10 & 7 & 7 & 145 \\\hline 20 & 5 & 8 & 8 & 180 \\\hline\end{array}$ Suppose that entry of firms into the industry changes this firm's demand schedule from columns 1 and 3 to columns 2 and 3. Maximum economic profit will

A) decrease to $25.
B) decrease to $35.
C) decrease to $70.
D) decrease to zero.

E) None of the above
F) A) and C)

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Question 73

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A monopolistically competitive firm has a

Compared to pure competition, monopolistic competition

In the short run, a profit-maximizing monopolistically competitive firm sets it price

Monopolistic competition entails a deadweight loss to society, even if the firms earn zero economic profits.

A monopolistically competitive firm's marginal revenue curve

The demand curve faced by a monopolistically competitive firm

The monopolistically competitive seller's demand curve will become more elastic the

Which of the following statements is correct?

Answer the question on the basis of the following demand and cost data for a specific firm. $\quad$$\quad$$\quad$$\quad$$\text { Demand Data }$ $\quad$$\quad$$\quad$ $\text { Cost Data }$ $\begin{array}{|c|c|c|c|c|}\hline&&(3) &\text { Total } \\\text { (1) } & \text { (2) } & \text { Quantit } & \text { Output } & \text { Total } \\\text { Price } & \text { Price } & \text { Y} & & \text { Cost }\\\hline \$ 50 & \$ 35 & 2 & 2 & \$ 45 \\\hline 45 & 30 & 3 & 3 & 55 \\\hline 40 & 25 & 4 & 4 & 70 \\\hline 35 & 20 & 5 & 5 & 90 \\\hline 30 & 15 & 6 & 6 & 115 \\\hline 25 & 10 & 7 & 7 & 145 \\\hline 20 & 5 & 8 & 8 & 180 \\\hline\end{array}$ If columns 1 and 3 are this firm's demand schedule, the profit-maximizing level of output will be

Answer the question on the basis of the following demand and cost data for a specific firm. $\quad$$\quad$$\quad$$\quad$$\text { Demand Data }$ $\quad$$\quad$$\quad$ $\text { Cost Data }$ $\begin{array}{|c|c|c|c|c|}\hline(1) &(2) &(3) &&\text { Total } \\\text { Price }&\text { Price }&\text { Quanti }&\text { Outpu }&\text { Cost } \\&&\text { ty }& \text { t }\\\hline 11.0 & \$ 10.0 & 6 & 6 & \$ 61 \\0 & 0 & & & \\\hline 9.99 & 8.85 & 7 & 7 & 62 \\\hline 9.00 & 8.00 & 8 & 8 & 64 \\\hline 8.00 & 7.00 & 9 & 9 & 67 \\\hline 7.10 & 6.10 & 10 & 10 & 72 \\\hline 6.00 & 5.00 & 11 & 11 & 79 \\\hline 5.15 & 4.15 & 12 & 12 & 86 \\\hline\end{array}$ If columns (1) and (3) of the demand data shown are this firm's demand schedule, the profit-maximizing level of output will be

Excess capacity refers to the

We would expect the four-firm concentration ratio of the restaurant industry in a large metropolitan area to be about 0.80, or 80 percent, and higher.

If you sum the squares of the market shares of each firm in an industry (as measured by percent of industry sales) , you are calculating the

"Variety is the spice of life" is best applied to which market structure?

Assume that the short-run cost and demand data given in the tables below confront a monopolistic competitor selling a given product and engaged in a given amount of product promotion. $\quad$$\quad$$\quad$$\quad$ $\text { Cost Data }$ $\quad$$\quad$$\quad$ $\text { Demand Data }$ $\begin{array}{|c|c|c|c}\begin{array}{c}\text { Total } \\\text { Output }\end{array} & \begin{array}{c}\text { Total } \\\text { Cost }\end{array} & \begin{array}{c}\text { Quantity } \\\text { Demanded }\end{array} & \text { Price } \\\hline 0 & \$ 25 & 0 & \$ 60 \\\hline 1 & 40 & 1 & 55 \\\hline 2 & 45 & 2 & 50 \\\hline 3 & 55 & 3 & 45 \\\hline 4 & 70 & 4 & 40 \\\hline 5 & 90 & 5 & 35 \\\hline 6 & 115 & 6 & 30 \\\hline\end{array}$ What output and price levels will maximize the firm's profit in the short run?

If monopolistically competitive firms in an industry are making an economic profit, then new firms will enter the industry and the product demand facing existing firms will shift

If the representative firm in a monopolistically competitive industry has an optimal output where P < ATC, the industry will expand in the long run.

Assume that in a monopolistically competitive industry, firms are earning economic profit. This situation will