Consider the monopolistically competitive market structure, which has some features of a perfectly competitive market and some features of a monopoly. Complete the following table by indicating whether each attribute characterizes a perfectly competitive market, a monopolistically competitive market, both, or neither. Check all that apply. Attributes Perfectly Competitive Market Monopolistically Competitive Market Freedom of entry and exit Negative (downward) sloping demand curve Product differentiation Few sellers

Consider the monopolistically competitive market structure, which has some features of a perfectly competitive market and some features of a monopoly. Complete the following table by indicating whether each attribute characterizes a perfectly competitive market, a monopolistically competitive market, both, or neither. Check all that apply. Attributes Perfectly Competitive Market Monopolistically Competitive Market Freedom of entry and exit Negative (downward) sloping demand curve Product differentiation Few sellers

Microeconomics A Contemporary Intro

10th Edition

ISBN:9781285635101

Author:MCEACHERN

Publisher:MCEACHERN

Chapter10: Monopolistic Competition And Oligopoly

Section: Chapter Questions

Problem 4QFR

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If the firms in a monopolistically competitive market are earning economic profits or losses in the short run, would you expect them to continue doing so in the long run? Why?
Continuing with the scenario in question 1, in the long run, the positive economic profits that the monopolistic competitor earns will attract a response either from existing firms in the industry or film outside. As those films capture the original films profit, what will happen to the original films profit-maximizing price and output levels?
Aside from advertising, how can monopolistically competitive films increase demand for their products?
Make a case for why monopolistically competitive industries never reach long-run equilibrium.
Think about firms such as the Coca Cola Company and PepsiCo who competeagainst each other in the monopolistically competitive market for soft drinks. Eachfirm produces a unique product, but each of these unique products is to some extenta substitute for the soft drinks produced by rival companies.Now imagine a situation where the firms within such a market are facing suchextreme competition that they are unable to make an operating profit. Characterisethis situation diagrammatically and explain what will happen to the market, payingparticular attention to the exit or entry of firms out of (or into) the market.
In California, let’s assume that Armando sells bagels in a monopolisticly competitive market. Armando compiled the data represented in the table below to determine the profit-maximizing quantity at which he should sell. What is Armando’s bagel store’s profit-maximizing quantity? Quantity Price TotalRevenue MarginalRevenue TotalCost MarginalCost 5 $21 $105 $21 $150 $30 10 $18 $180 $15 $160 $2 15 $16 $240 $12 $180 $4 20 $14 $280 $8 $220 $8 25 $11 $275 $1 $270 $10 30 $10 $300 $0 $330 $12 35 $8 $280 −$4 $400 $14
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Consider a duopolistic market with an inverse demand curve P(Q) = 460 − 4Qand constant marginal costs for each firm that are given by MC(Q) = 10.Assume fixed costs are negligible. The two identical firms are competing in this market by choosing their production quantities simultaneously. In the equilibrium, each firm produces 37.5 units and the prevailing market price is 160. How would the joint profits of these two firms change if they successfully formed a cartel? Change in joint profits: ? (Enter your answer rounded to two decimal places; include a negative sign if appropriate.)
(Monopolistic Competition and Perfect Competition Compared)Illustrated below are the marginal cost and averagetotal cost curves for a small firm that is in long-runequilibrium.a. Locate the long-run equilibrium price and quantity ifthe firm is perfectly competitive.b. Label the price and quantity p1 and q1.c. Draw in a demand and marginal revenue curve to illustratelong-run equilibrium if the firm is monopolisticallycompetitive. Label the price and quantity p2 and q2 .d. How do the monopolistically competitive firm’s priceand output compare to those of the perfectly competitivefirm?e. How do long-run profits compare for the two types offirms?
Suppose that a firm produces wool jackets in a monopolistically competitive market. The following graph shows its demand (DD) curve, marginal revenue (MRMR) curve, marginal cost (MCMC) curve, and long-run average total cost (LRATCLRATC) curve. Assume that all firms in the industry face the same cost structure. Place the tan point (dash symbol) on the graph to indicate the long-run monopolistically competitive equilibrium price and quantity for this firm. Next, place the purple point (diamond symbol) to indicate the point at which this firm would produce in the long run if it operated in a perfectly competitive market.
Q9. A fundamental feature of a monopolistic market is that the firm ________. * a) can sell any quantity it desires at the current market price b) can obtain any price for any quantity of output c) faces a perfectly inelastic demand curve d) faces the price and quantity trade-off dictated by market demand Q2. Which of the followings is an appropriate statement about the "limit pricing" strategy"? * a) The strategy is most effective in a perfectly competitive market. b) Goods and services are sold by suppliers at a price higher than the short-term profit maximizing level. c) The main purpose of the strategy is to protect the existing firm's long-run profits from damage by competition. d) The main purpose of the strategy is to charge each customer the maximum price he or she is prepared to pay for the product. Q3. Which of the followings is an example of second degree price discrimination? * a) Ladies' night in a bar b) Half-price tickets for kids in the cinema…
For market failure unit (market power). In the long run graph for monopolistic competition, firms are no longer earning abnormal profit due to low barriers to entry as there are more similar goods on the market, lowering demand, causing them to earn normal profits, however, shouldn't that cause MR to be equal to AR (demand curve), similar to the normal profit in perfect competition? Why is MR less than AR here when it is earning normal profit?