ECON 2020 - HW8

In monopolistic competition

a large number of firms compete.

Monopolistic competition is a market structure in which

firms compete on product quality, price, and marketing.

A characteristic of monopolistic competition is

each firm produces a differentiated product.

In monopolistic competition, the presence of a large number of firms making a differentiated product means that

each firm has some ability to effect the price of its particular good or service.

In monopolistic competition, each firm supplies a ________ part of the total market output and its actions ________ the actions of the other firms.

small; do not directly affect

In monopolistic competition, when firms make an economic profit

new firms enter the industry so that the price falls and the economic profit eventually falls to zero.

One difference between perfect competition and monopolistic competition is that

firms in monopolistic competition face a downward-sloping demand curve.

Product differentiation exists within an industry if

there are close but not perfect substitutes for a product.

Firms in monopolistic competition always will

set their price above their marginal cost.

Firms in monopolistic competition have rivals that

set their prices according to the demand curves they face.

In monopolistic competition, profit is maximized when the amount produced is such that

marginal revenue equals marginal cost.

In the short run, for a firm in monopolistic competition

price exceeds marginal cost.

When firms in monopolistic competition incur an economic loss, some firms will

exit the industry, and demand will increase for the firms that remain.

In the above figure, if the firm is in monopolistic competition, it will produce

40 units.

The above figure shows the demand and cost curves for a firm in monopolistic competition. The firm earns total revenue of

$120.

The figure shows the demand curve for Nike shoes (D), and Nike's marginal revenue curve (MR), marginal cost curve (MC), and average total cost curve (ATC).In the figure above, Nike's economic profit is

$3,000.

The figure above shows a firm in monopolistic competition. If all firms in the industry have the demand and cost curves illustrated in the figure, then in the long run

some firms will have exited the industry.

Which of the following is TRUE regarding the long run for a firm in monopolistic competition?

Price equals average total cost.

Advertising costs are ________ costs and the per unit cost of advertising ________ as production increases.

fixed; decreases

The loss of efficiency that occurs in monopolistic competition has to be weighed against the gain of

greater product variety.

Monopolistically competitive firms constantly develop new products in an effort to

increase the demand for their product.

Antitrust law is law that

prohibits certain kinds of market behavior by firms.

In part, an antitrust laws

prohibit monopolistic practices.

The Sherman Act

the first antitrust law, was enacted in 1890.

Which of the following is always a violation of the antitrust law?

price fixing among competitors

Which of the following is a distinguishing characteristic of oligopoly?

Natural or legal barriers prevent the entry of new firms.

A duopoly occurs when

there are only two producers of a particular good competing in the same market.

A monopolistically competitive firm is like an oligopolistic firm insofar as

The EU's antitrust chief in November 2008 fined car glass producers Asahi, Pilkington, Saint-Gobain and Soliver more than 1.3 billion euros ($1.66 billion) for price-fixing, the largest sum ever levied by the EU for a cartel. What are the economic justifications of making price fixing illegal?

Consumers suffer because of decreased consumer surplus and the outcome is inefficient because of deadweight loss.

One difference between oligopoly and monopolistic competition is that

fewer firms compete in oligopoly than in monopolistic competition.

La Super Rica is a taco stand in Santa Barbara, California. It is popular with the locals and even the late Julia Child found the food delicious. If La Super Rica is making an economic profit, what is the probable outcome in the taco market?