Economics (MindTap Course List)
13th Edition
ISBN: 9781337617383
Author: Roger A. Arnold
Publisher: Cengage Learning
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Chapter 24, Problem 2QP
To determine
Evaluate the statement “excess capacity is the price pay for product differentiation” in terms of
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Define monopolistic competitio. What characteristics characterise monopolistic competition?
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Economics (MindTap Course List)
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- In the model of monopolistic competition, we say that there is product differentiation. What does this mean, and how does it differ from the assumption of homogeneous goods in perfect competition?arrow_forwardIn the model of monopolistic competition, industry, then we should expect industry. fixed costs; more marginal costs; less marginal costs; more fixed costs; less if an industry has large relative to another firms to operate in a long-run equilibrium of thatarrow_forwardWhy is there a price markup over marginal cost in monopolistic competition? a downward-sloping demand curve, price exceeds marginal cost The graph shows the demand curve and marginal revenue curve of Whitewater, Inc., a producer of rubber rafts in monopolistic competition. Draw the marginal cost curve if the firm produces 150 rafts a week. Label it. Draw a point at the intersection of the MC and MR curves. Draw a point to show the price that Whitewater charges for a raft when it produces 150 rafts a week. Draw an arrow to show the amount of Whitewater's markup. What is Whitewater's markup? Whitewater's markup is $750 a raft. 750- 675- 600- 525- 450- 375- 300- 225- 150- 75- 0 Price and cost (dollars per raft) 50 100 150 Quantity (rafts per week) D MR 200 >>> Draw only the objects specified in the question. 21arrow_forward
- Explain monopolistic competition. How is it similar to perfect competition? How does it differ from perfect competition?arrow_forwardDiscuss to what extent you agree with the following statements. Monopolistically competitive firms are producing efficiently because P=MC in the long-run.arrow_forwardList the three key attributes of monopolistic competition.arrow_forward
- Why 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_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_forwardWhat type of product by individual firms are in a monopolistic competition and how is the ease of entry and exit in that market for individual firms.arrow_forward
- In the short run, the price charged by a monopolistic competitor is equal to his marginal cost. True or False?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_forwardMonopolistic competition resembles perfect competition.In what ways are they similar and what makes them different?arrow_forward
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