Exploring Economics
8th Edition
ISBN: 9781544336329
Author: Robert L. Sexton
Publisher: SAGE Publications, Inc
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Chapter 14, Problem 17P
To determine
To indicate:
Whether the given items come under
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Define monopolistic competition. Explain the characteristics of monopolistic competition
“Monopolistic competition is monopolistic up to the point at which consumers become willing to buy close substitute products and competitive beyond that point.” Explain.
What are the characteristics of monopolistically competitive markets? If the price of the product in a monopolistically competitive market increases what happens to the number of individual firms in the market and to the level of profit in the long run? Fully explain your answer.
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- In the long run, the positive economic profits earned by the monopolistic competitor will attract a response either from existing firms in the industry or firms outside. As those firms capture the original firm’s profit, what will happen to the original firm’s profit-maximizing price and output levels? Show on a grapharrow_forwardList three key attributes of monopolistic competition.Draw and explain a diagram to show the short-run equilibrium in a monopolistically competitive market. How does this equilibrium differ from that in a perfectly competitive marketarrow_forwardDraw the demand, MR, ATC, and MC curves for a monopolistically competitive firm earning economic profit in the short-run (be sure to draw the ATC below the point where MR and MC cross. Complete the 4 steps on your graph to show the amount of profit the firm is earning. You can make up numbers if it makes it easier for you.arrow_forward
- Why this is true "When monopolistically competitive firms make a profit in the short run, ,then in the long run, their demand curves will shift left as new firms enter." If you can give a graph explanation, that would be great.arrow_forwardWhat are the differences between the two market structures of monopolistic competition and monopoly? Why is the name "monopolistic competition" used to describe a category of market structure that is different from monopoly? Isn't that name confusing?arrow_forwardWhy is monopolistic competition said to be inefficient?Suppose that you counted the higher price the consumer pays for the monopolistically competitive firm's product as part of consumer surplus. Would that change the conclusion regarding the efficiency of monopolistic competition?arrow_forward
- What are the “monopolistic” and the “competitive” elements of monopolistic competition?Instructions: In order to receive full credit, you must make a selection for each option. For correct answer(s), click the box once to place a check mark. For incorrect answer(s), click twice to empty the box.Similar to a monopoly, a monopolistic competitor: can restrict output to increase price (at least in the short run).checked can make profits or losses in the short run.unanswered faces a downward-sloping demand curve.unanswered faces high barriers to entry.unanswered makes economic profits in the long run.unanswered produces where P > MR = MC.unanswered has one seller.unanswered Instructions: In order to receive full credit, you must make a selection for each option. For correct answer(s), click the box once to place a check mark. For incorrect answer(s), click twice to empty the box.Similar to a perfect competitor, a monopolistic competitor: faces a perfectly elastic demand…arrow_forwardThe following graph represents a monopolistically competitive firm in long-run equilibrium. Place the black point (cross sign) on the graph to indicate the short-run profit-maximizing price and quantity for this monopolistically competitive company. Next, place the grey star on the graph to indicate the point where the LRAC reaches a minimum. PRICE PER UNIT (Dollars) 500 450 400 350 300 250 200 150 100 50 MC 0 0 50 LRAC MR Demand 100 150 200 250 300 350 400 450 500 QUANTITY (Units) Monopolistically Competitive Outcome Minimum of the LRAC The long-run equilibrium price is $ (Hint: Use the graph to find the numeric value of the price at equilibrium.) The long-run equilibrium quantity is units. The LRAC curve is at its minimum at a quantity of The long-run equilibrium price is units. the marginal cost of producing the equilibrium output. ?arrow_forwardSuppose that a company operates in the monopolistically competitive market for denim jackets. The following graph shows the demand curve, marginal revenue (MR) curve, marginal cost (MC) curve, and average total cost (ATC) curve for the firm. Place a black point (plus symbol) on the graph to indicate the long-run monopolistically competitive equilibrium price and quantity for this firm. Nex 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 per jacket) 100 90 80 70 60 50 ATC 20 40 30 20 10 10 MC MR Demand 0 + + 0 10 20 30 40 50 60 70 80 90 100 QUANTITY (Thousands of jackets) Mon Comp Outcome Min Unit Cost at the optimal the efficient scale. Because this market is monopolistically competitive, you can tell that it is in long-run equilibrium by the fact that P= ATC quantity for each firm. Further, the quantity the firm produces in long-run equilibrium is True or False: This indicates…arrow_forward
- List the three key attributes of monopolistic competition. Draw and explain a diagram to show the long-run equilibrium in a monopolistically competitive market. How does this equilibrium differ from that in a perfectly competitive market?arrow_forwardWhat effect would a successful advertising campaign differentiating a product from one's competitors have on a monopolistically competitive firm's demand and its elasticity of demand? What does this do to the firm's profits? You may have heard the slogan: "advertising doesn't cost, it pays?" Is that sometimes true?arrow_forwardWhat are the main characteristics of a monopolistically competitive firm? Explain.arrow_forward
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