Principles of Economics (12th Edition)
12th Edition
ISBN: 9780134078779
Author: Karl E. Case, Ray C. Fair, Sharon E. Oster
Publisher: PEARSON
expand_more
expand_more
format_list_bulleted
Question
Chapter 15, Problem 4.1P
(a)
To determine
Whether the monopolistically competitive firms produce economic profits because they are protected.
(b)
To determine
Whether the monopolistically competitive firms are efficient in the long run.
Expert Solution & Answer
Want to see the full answer?
Check out a sample textbook solution
Students have asked these similar questions
Which of the following statements is true?
Select an answer and submit. For keyboard navigation, use the up/down arrow keys to select an answer.
b
С
d
Monopolistic competitive firms that earn economic profits in the short run commonly will find their profits competed
away in the long run.
Monopolistic competitive firms will earn economic profits in the long run because of their ability to control the price of
the product.
Monopolistic competitive firms will earn zero economic profits in both the short and the long run.
Monopolistic competitive firms must earn economic profits in the long run, or they will shut down.
The diagram above represents a monopolistically competitive firm. Answer the questions below.
From the diagram, economies of scale are maximized at which output level? Explain.
From the diagram, what is the allocatively efficient output for this firm? Explain.
Give an example of a market that has monopolistic competition and explain how the example you have chosen exhibits competitive aspects and how it also exhibits monopolistic aspects.
Chapter 15 Solutions
Principles of Economics (12th Edition)
Knowledge Booster
Similar questions
- The diagram above represents a monopolistically competitive firm. Answer the questions below. Is this firm operating in the short-run or long-run? How do you know? Calculate this firm’s accounting profit. From the diagram, what is the productively efficient output for this firm? From the diagram, economies of scale are maximized at which output level? Explain. From the diagram, what is the allocatively efficient output for this firm? Explain.arrow_forwardHow might advertising make markets less competitive? How might it make markets more competitive? Give the arguments for and against brand names. What are the three reasons that a market might have a monopoly? Give two examples of monopolies, and explain the reason for each. List the three key attributes of monopolistic competition. What kind of agreements is illegal for businesses to make? What is meant by competitive firm? what is meant Perfect competition? what is market structure? What is economics?arrow_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_forward
- Answer all four questions! Is a monopolistically competitive firm productively efficient? How can you tell? Offer one reason why a monopolistically competitive firm might be productively inefficient. Is it allocatively efficient? How can you tell? Offer one reason why a monopolistically competitive firm might be allocatively inefficient.arrow_forwardThe diagram shows a firm that produces tennis rackets in a monopolistically competitive market. Assume that it is operating in the short run. Is the firm earning a positive profit or suffering a loss in the short run? Explain what will happen to a typical firm in this industry in the long run, including characteristics of the firm in long run equilibrium. A diagram may be used as part of the explanation, but is not required.arrow_forwardWhich of the following statements is true about the difference between monopoly and monopolistic competition? a.Monopolies always earn positive profits b.Monopolistically competitive firms have no barriers to entry or exitarrow_forward
- Draw a diagram to show the long-run equilibrium of a firm in a Monopolistically Competitive market clearly labeling the profit maximizing level of Q and P. Is P greater/less than ATC? Is P greater/less than MC? How much profit firm is earning in the long run? Also show the efficient level of outcome and explain why this firm does not produce at the efficient level.arrow_forwardI need help with this questionarrow_forwardWhat 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_forward
- Which of the following statements is correct? a. In the long run, both perfectly competitive firms and monopolistically competitive firms operate with excess capacity. b. A firm operates with excess capacity when, in the long run, its level of output is below the efficient scale. c. For any firm, efficient scale is the level of output at which the average-total-cost curve is tangent to the demand curve. d. All of the above are correct.arrow_forwardWhat 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.arrow_forwardIn 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_forward
arrow_back_ios
SEE MORE QUESTIONS
arrow_forward_ios
Recommended textbooks for you
Economics (MindTap Course List)EconomicsISBN:9781337617383Author:Roger A. ArnoldPublisher:Cengage Learning
Economics (MindTap Course List)
Economics
ISBN:9781337617383
Author:Roger A. Arnold
Publisher:Cengage Learning