Principles of Microeconomics
7th Edition
ISBN: 9781305156050
Author: N. Gregory Mankiw
Publisher: Cengage Learning
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Question
Chapter 16, Problem 5CQQ
To determine
Long run equilibrium in a monopolistic competition .
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Monopolistically competitive firms use product differentiation to
a.limit the number of firms in the industry.
b.ensure long-run profits.
c.achieve market power.
d.block other firms from entering the industry.
Fortune Bakery sells cookies in a monopolistically competitive market.
To maximize profit, what quantity should Fortune Bakery produce and what price should it charge?
Suppose Fortune Bakery is in the long run equilibrium. Explain how much economic profit Fortune Bakery is making.
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
Chapter 16 Solutions
Principles of Microeconomics
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 monopolistically competitive industry is earning short-run positive economic profits, what do we expect to happen in the long run? a Existing firms will exit. b New firms will enter. c The industry will be regulated. d Firms will collude to keep prices high.arrow_forwardWhat is the first item to identify when determining the short-run equilibrium for a monopolistically competitive firm? a. the total profits b. the total revenue C. the total costs d. the profit-maximizing level of outputarrow_forwardWhich of the following is not true of a monopolistically competitive firm? a. The firm will not likely earn an economic profit in the long run. b. The firm will maximize profits by producing where MR = MC. c. The firm will produce an efficient quantity where average total cost is minimized.arrow_forward
- Assume 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. 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_forwardIf 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_forward
- Part II | The graph below shows a monopolistically competitive firm in the short run. Price and Cost 8 9 8 20 0 100 MR 200 300 400 500 600 700 800 Output MC 9. What is the firm's profit-maximizing price and quantity? 10. How much profit does that firm make at that price and quantity? 900 ATC -d-parrow_forwardPlease answer fast please arjent help pleasearrow_forwardIn monopolistic competition, a firm has some ability to affect the price for its product because of Select one a. economic profits. b.easy entry and exit. C. many competitors product differentlation.arrow_forward
- A 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_forwardIn the short run, what quantity does Lite and Kool produce, what price does it charge, and does it make an economic profit?arrow_forwardDE Quantity MC MR ATC Demand The graph above represents a firm in a monopolistically competitive market. Which of the following is true? The firm's profit-maximizing quantity is E. The firm is making a profit of (A - B) x D. The firm is making zero economic profits. The firm is making a loss of (A - B) x D.arrow_forward
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