E1 How does advertising impact monopolistically competitive firms?OIt causes a firm's perceived demand curve to become more inelastic.O Advertising expenses drive down average cost of production by increasing demand for the product and in turn increasestotal revenue.O It either causes a firm's perceived demand curve to become more elastic, or advertising causes demand for the firm'sproduct to increase.O Advertising always causes monopolistically competitive firms to experience lower average costs.What is the difference between collusion and competition?O Collusion is when firms follow the price changes and product changes of the dominant firm in an oligopolisticmarket.Competition is when firms operate independently.O Competition firms follow the price changes and product changes of the dominant firm in an oligopolistic market.Collusion is when firms operate independently.O Collusion is when firms act together in ways to reduce output, keep prices high, and divide up markets. Competition iswhen firms operate independently.O Competition is when firms operate independently. Collusion is when firms in the oligopoly market structure try to invitenew entrants into the market to make it more competitive. What does the prisoner's dilemma teach us about the behavior of oligopolists?O It is a scenario that teaches us that the gains from cooperation are larger than the rewards from pursuing self-interest.O It teaches us that oligopolists typically get better business results when they pursue their own self-interests.O It teaches us that the oligopoly market structure always leads to poor business results.O It teaches us that oligopolists make random decisions about business decisions that could land them in jail.What are the key trade offs of imperfect competition?O The monopolistically competitive market structure provides powerful incentives for innovation, but the strongest firms ina monopolistically competitive market become oligopolists.Q The monopolistically competitive market structure allows firms to achieve economic profit in the short run, but theindividual firms all face perfectly elastic demand curves.O The monopolistically competitive market structure fails to achieve allocative efficiency, but the firms all face perfectlyelastic demand curves.O The monopolistically competitive market structure provides powerful incentives for innovation, but they never achieveproductive efficiency in the long run.

Monopolistically competitive firm produces the differentiated products and each firm has some market…

How does advertising impact monopolistically competitive firms? O It causes a firm's perceived demand curve to become more inelastic. O Advertising expenses drive down average cost of production by increasing demand for the product and in turn increases total revenue. O It either causes a firm's perceived demand curve to become more elastic, or advertising causes demand for the firm's product to increase.

How does advertising impact monopolistically competitive firms? O It causes a firm's perceived demand curve to become more inelastic. O Advertising expenses drive down average cost of production by increasing demand for the product and in turn increases total revenue. O It either causes a firm's perceived demand curve to become more elastic, or advertising causes demand for the firm's product to increase.

ECON MICRO

5th Edition

ISBN:9781337000536

Author:William A. McEachern

Publisher:William A. McEachern

Chapter10: Monopolistic Competition And Oligopoly

Section: Chapter Questions

Problem 1.1P

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K Suppose the figure to the right represents the market for a particular brand of shampoo, such as L'Oreal, Lancome, or Maybelline. Assume the market is monopolistically competitive. What is the firm's profit-maximizing price and quantity? thousand per bottle. (Enter your The monopolistically competitive firm's profit-maximizing quantity is bottles of shampoo, and its profit-maximizing price is $ responses as integers.) Price and cost (per bottle) ♫ 3.00- MC 2.80- ATC 2.60- 2.40- 2.20- 2.00- 1.80- 1.60- 1.40- 1.20- 1.00- 0.80- 0.60- 0.40- 0.20- 0.00+ 0 MR 2 4 6 8 10 12 14 16 18 20 22 24 Quantity (shampoo bottles in thousands)
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ls uccess Tips ■ccess Tips NOUT Actumpto Koup the Highest/3 3. Is monopolistic competition efficient? Suppose that a firm produces baseball bats in a monopolistically competitive market. The following graph shows its demand curve, marginal revenue (MR) curve, marginal cost (MC) curve, and average total cost (ATC) curve. Place a black point (plus symbol) on the graph to indicate the long-run monopolistically competitive equilibrium price and quantity for this firm. Next, place a grey point (star symbol) to indicate the minimum average total cost the firm faces and the quantity associated with that cost. PRICE (Dollars par bat) 80 70 60 20 MO о о 10 20 40 ATC 60 QUANTITY (Thousands of bas) Demand Man Camp Outcome Min Unit Cost Because this market is a monopolistically competitive market, you can tell that it is in long-run equilibrium by the fact that optimal quantity. Furthermore, the quantity the firm produces in long-run equilibrium is average total cost. at the the quantity at which…
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Submit All stion 17 of 30 Which statement best explains why consumers might benefit more from monopolistic competition than perfect competition? O The demand curve for a monopolistically competitive firm follows the law of demand, but the demand curve for a perfectly competitive firm does not. O Monopolistic competitors will use fewer resources per unit of output than perfect competitors, so overall output will be maximized. O The benefits of having more variety offsets the losses from productive and allocative inefficiencies. The balance between marginal cost and price in monopolistic competition ensures that the optimal level of output will be produced. 8: 46°F > 节 a
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Which of the following is a difference between a monopolistically compettive market and a monopoly in the long run? OA. Firms in a monopolistically competitive market eam zero economic profits in the long run, while a monopolist incurs losses in the long run. B. Firms in a monopolistically competitive market charge a price higher than marginal cast in the long run, while a monopolist charges a price equal to marginal cast in the long run OC. Firms in a monopolistically competitive market car zero economic profits in the long run, while a monopolist usually carns positive economic profits in the long run. OD. Firms in a monopolistically competitive market charge a price lower than merginal cost in the long run, while a monopolist charges a price equal to merginel cost in the long run.
er to the information provided in Figure 15.2 below to answer the questions that follo Demand and cost conditions for We Do Hair MC ATC 32 28 24 20 MR 40 46 50 60 Number of perms b. 1) Refer to Figure 15.2. The profit-maximizing number of perms for We Do Hair, a monopolistically competitive firm, is 2) Refer to Figure 15.2. At We Do Hair, a monopolistically competitive firm, the profit- maximizing price for a perm is 3) Refer to Figure 15.2. If We 1Do Hair is maximizing profit as a monopolistically competitive firm, it is earning a profit of 4) Refer to Figure 15.2. If We Do Hair is maximizing profit as a monopolistically competitive firm, its total revenue equals 5) Refer to Figure 15.2. If We Do Hair is maximizing profit as a monopolistically competitive firm, its total costs are 6) Refer to Figure 15.2. From society's point of view, the efficient level of output is 7) Refer to Figure 15.2. In this monopolistically competitive industry, in the long run, Acessibility: Investigate D…
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