Principles of Economics (MindTap Course List)
8th Edition
ISBN: 9781305585126
Author: N. Gregory Mankiw
Publisher: Cengage Learning
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Question
Chapter 16, Problem 3CQQ
To determine
Monopolistic competition and production.
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The cost of producing a tube of tooth paste is $0.05. If the market for tooth paste is monopolistically competitive, a manufacturer who charges $0.05 for each bottle will ________.
a.
exit the industry in the long run
b.
earn zero economic profits in the short run
c.
incur a loss in the short run
d.
shut down production in the short run
A monopolistically competitive firm that earns an accounting profit in the short run
Group of answer choices
a. must also earn an economic profit in the short run.
b. does not earn enough to earn an economic profit in the short run.
c. could earn an economic profit, break even, or suffer an economic loss in the short run.
d. could earn an economic profit or break even, but could not suffer an economic loss in the short run.
Which of the following conditions does NOT describe a firm in a monopolistically competitive market?
a. It sells a product different from its competitors.
b.It takes its price as given by market conditions.
c. It maximizes profit both in the short run and in the long run.
d.It has the freedom to enter or exit in the long run.
Chapter 16 Solutions
Principles of Economics (MindTap Course List)
Ch. 16.1 - Prob. 1QQCh. 16.2 - Prob. 2QQCh. 16.3 - Prob. 3QQCh. 16 - Prob. 1CQQCh. 16 - Prob. 2CQQCh. 16 - Prob. 3CQQCh. 16 - Prob. 4CQQCh. 16 - Prob. 5CQQCh. 16 - If advertising makes consumers more loyal to...Ch. 16 - Prob. 1QR
Ch. 16 - Prob. 2QRCh. 16 - Prob. 3QRCh. 16 - Prob. 4QRCh. 16 - How might advertising reduce economic well-being?...Ch. 16 - Prob. 6QRCh. 16 - Prob. 7QRCh. 16 - Prob. 1PACh. 16 - Prob. 2PACh. 16 - Prob. 3PACh. 16 - Prob. 4PACh. 16 - Prob. 5PACh. 16 - Prob. 6PACh. 16 - Prob. 7PACh. 16 - Prob. 8PACh. 16 - Prob. 9PACh. 16 - Sleek Sneakers Co. is one of many firms in the...
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- If a firm is operating in a monopolistically competitive market, then in the long run: A. the firm will maximize its profit by producing the output level at which the marginal revenue is minimized. B. the firm will earn zero economic profit. C. the firm will maximize its profit by producing the output level at which the average cost is minimized. D. all of the abovearrow_forwardWhen a monopolistically competitive industry is in long-run equilibrium: choose correct and explain your choice a. firms earn economic profits. b. firms earn zero economic profits. c. price equals minimum average total cost. d. price equals marginal cost.arrow_forwardWhich two curves in a monopolistically competitive market in the long run will be equal to each other due to firm entry and exit? a. marginal revenue curve and its total cost curve. b. marginal revenue curve and its average total cost curve. c. demand curve and its total cost curve. d. demand curve and its average total cost curve.arrow_forward
- In monopolistically competitive markets, zero economic profit is associated with: Select one: a. inefficient output and excess capacity. b. efficient output and no excess capacity. c. competitive equilibrium because other firms entered the market. d. no deadweight loss e. minimization of average total cost.arrow_forwardAssume a monopolistically competitive firm encounters a decrease in average variable cost at all output levels.We would expect: a. The price to rise and output to rise b. The price to fall and output to fall c. The price to rise and output to fall d. The price to fall and output to risearrow_forwardA photocopy shop in a monopolistically competitive market could daily sell 17,600 copies at a price of 4 cents, or it could sell 26,400 copies at a price of 3 cents. a. The marginal revenue associated with this range of the business's demand curve is____ cent(s). b. Draw the relevant range of this business's demand curve and identify a point on its marginal revenue curve.arrow_forward
- Which of the following conditions does NOT describe afirm in a monopolistically competitive market?a. It sells a product different from its competitors.b. It takes its price as given by market conditions.c. It maximizes profit both in the short run and inthe long run.d. It has the freedom to enter or exit in the long run.arrow_forwardMonopolistically competitive firms use product differentiation to Question 3Answer a. block other firms from entering the industry. b. limit the number of firms in the industry. c. ensure long-run profits. d. achieve market power.arrow_forwardA. How does the demand curve faced by the firm in monopolistically competitive market differ from the demand curve faced by a firm participating in a purely competitive market? b. How does that impact how the firm sets its price and the quantity the firm produces?arrow_forward
- A monopolistically competitive firm faces demand given by this equation: P = 50 – Q . It has no fixed costs and its marginal cost is $20 per unit. What price will the firm charge when it is maximizing its profits? a. $25 b. $30 c.$35 d. $20arrow_forwardII. The figure is drawn for a monopolistically competitive firm. PRICE 140 123.33 90 56.67 100 133.33 QUANTITY MC ATC Demand MR Refer to the figure above and explain: A). In order to maximize its profit, how many units the firm will choose to produce? 100 B). When the firm is maximizing its profit, the markup over marginal cost amounts to 50 C). The firm's maximum profit is D). Efficient scale is reached beyond which level of units? 133.33arrow_forward8. A monopolistically competitive firm has a: a. Highly elastic demand curve b. perfectly inelastic demand curve c. Highly inelastic demand curve d. perfectly elastic demand curvearrow_forward
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