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Exam 16: Monopolistic Competition

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Question 61

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Scenario 16-6 ​ Dean goes to the grocery store to buy chips and soda for a party. He purchases brand name products even though generic versions are available at lower prices. His friend John says he was irrational to spend more for a nearly identical product. His friend Martina agreed with Dean's decision to spend more for the brand name products. -Refer to Scenario 16-6. Which friend is a critic of brand names?

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Question 62

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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 63

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One characteristic of an oligopoly market structure is

In a market that is characterized by imperfect competition,

Figure 16-3 -Refer to Figure 16-3. At the profit-maximizing, or loss-minimizing, output level, how many units of output will the firm in this figure produce?

Scenario 16-4 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.) $\begin{array}{|l|l|l|l|l|}\hline \text { Quantity } & \text { Price } & \text { MR } & \text { MC } & \text { ATC } \\\hline 20 & \$ 5.60 & \$ 5.20 & \$ 2.20 & \$ 2.05 \\\hline 40 & \$ 5.20 & \$ 4.40 & \$ 2.40 & \$ 2.10 \\\hline 60 & \$ 4.80 & \$ 3.60 & \$ 2.60 & \$ 2.15 \\\hline 80 & \$ 4.40 & \$ 2.80 & \$ 2.80 & \$ 2.20 \\\hline 100 & \$ 4.00 & \$ 2.00 & \$ 3.00 & \$ 2.25 \\\hline 120 & \$ 3.60 & \$ 1.20 & \$ 3.20 & \$ 2.30 \\\hline 140 & \$ 3.20 & \$ 0.40 & \$ 3.40 & \$ 2.35 \\\hline 160 & \$ 2.80 & -\$ 0.40 & \$ 3.60 & \$ 2.40 \\\hline 180 & \$ 2.40 & -\$ 1.20 & \$ 3.80 & \$ 2.45 \\\hline\end{array}$ -Refer to Scenario 16-4. How many ice cream cones should Peter sell in one day to maximize his profits?

In markets where the government imposes an excise tax on unit sales, it also has a tendency to dabble with restrictions on advertising (for example, cigarettes and hard liquor). Do potential (or actual) restrictions on advertising in these markets serve the interest of a government that is interested in maximizing its tax revenue from the sale of these products? Explain your answer.

Figure 16-6 The figure is drawn for a monopolistically competitive firm. ​ -Refer to Figure 16-6. The firm's maximum profit

The fact that monopolistically competitive firms charge a price that exceeds marginal cost is responsible for the

Monopolistic competition is the only market structure that features many sellers.

The two types of imperfectly competitive markets are

Which of the following industries has the highest concentration ratio?

If a firm in a monopolistically competitive market successfully uses advertising to decrease the elasticity of demand for its product, the firm will

In the debate between the critics and defenders of advertising, what conclusion have policymakers come to regarding the effect of advertising on competition - advertising makes markets more competitive or less competitive?

Figure 16-4 ​ ​ Graph (a) Graph (b) Graph (c) Graph (d) ​ ​ -Refer to Figure 16-4. Graph (b) is consistent with a firm in a monopolistically competitive market that is

Which of the following statements is correct?

Table 16-1 The following table shows the output produced by each of the top eight firms in four industries as well as the total industry output for those industries. ​ ​ $\begin{array} { | c | c | c | c | c | } \hline \text { Firm } & \text { Industry A } & \text { Industry B } & \text { Industry C } & \text { Industry D } \\\hline 1 & 50,000 & 18,000 & 37,000 & 40,000 \\\hline 2 & 47,000 & 17,750 & 36,500 & 39,000 \\\hline 3 & 43,000 & 17,250 & 35,500 & 37,000 \\\hline 4 & 38,000 & 16,500 & 34,000 & 34,000 \\\hline 5 & 32,000 & 15,500 & 32,000 & 30,000 \\\hline 6 & 25,000 & 14,250 & 29,500 & 25,000 \\\hline 7 & 17,000 & 12,750 & 26,500 & 19,000 \\\hline 8 & 8,000 & 11,000 & 23,000 & 12,000 \\\hline \text { Total } & \mathbf { 2 7 0 , 0 0 0 } & \mathbf { 1 3 0 , 0 0 0 } & \mathbf { 3 0 0 , 0 0 0 } & \mathbf { 2 5 0 , 0 0 0 } \\\hline\end{array}$ ​ -Refer to Table 16-1. Which industry has the lowest concentration ratio?

Free entry eliminates long-run profits for firms in competitive and monopolistic industries.

When the loss from a business-stealing externality exceeds the gain from a product-variety externality,

Figure 16-9 ​ ​ -Refer to Figure 16-9. If this firm profit-maximizes, what price will it charge?