question
Two types of market models that closely approximate many markets in the real world are
answer
monopolistic competition and oligopoly
question
___________ _ (one word) competition is a market characterized by having many sellers, differentiated products, and ease of entry and exit from an industry.
answer
Blank 1: Monopolistic or Monopolistically
question
Monopolistic competition normally consists of 25 to 75 firms rather than hundreds or thousands and involves which of the following characteristics?
answer
no collusion
small market shares
independent action
small market shares
independent action
question
Why does each monopolistically competitive firm generally have limited control over market price?
answer
Each firm has a relatively small percentage of the total market.
question
In monopolistically competitive industries
answer
collusion is unlikely because there is a large number of firms.
question
A good way to describe ________ (monopolistic/oligopolistic) competition is that it mixes a small amount of monopoly power with a large amount of competition, while _______ (monopoly/oligopoly) blends a large amount of monopoly power with a small amount of competition through entry and considerable rivalry among firms.
answer
Blank 1: monopolistic
Blank 2: oligopoly or oligopolistic
Blank 2: oligopoly or oligopolistic
question
Firms in monopolistically competitive industries are ______ interdependent.
answer
not
question
Andrea and Robert are considering operating a retail jewelry store. Robert has been designing jewelry for a wholesaler since graduating from college. Andrea was a business major and is evaluating if they can increase their income by being in business for themselves. Which of the following characteristics show that the industry they wish to enter is a monopolistically competitive industry?
answer
1) There are many places to buy jewelry.
2)Opening a retail jewelry store is relatively easy.
2)Opening a retail jewelry store is relatively easy.
question
Which of the following correctly describes the difference between products under pure competition versus products under monopolistic competition?
answer
Standardized products are sold in pure competition, but differentiated products are sold in monopolistic competition.
question
Which of the following are typical characteristics of monopolistic competition?
answer
1) No collusion
2)Small market share
3)Independent action
2)Small market share
3)Independent action
question
Monopolistically competitive firms typically have a(n) ______ share of the market.
answer
relatively small
question
Which of the following scenarios does not illustrate the concept of product differentiation based on service?
answer
Some stores may charge different prices.
question
Why is collusion unlikely in a monopolistically competitive industry?
answer
The industry has a relatively large number of firms.
question
When a business secures a convenient store location even if it means higher prices and less selection, it is known as
answer
product differentiation
question
In monopolistically competitive industries
answer
firms feel independent of one another, allowing them to determine their own price without considering the possible reactions by rival firms
question
Compared with oligopoly and monopoly, entry of new firms into monopolistically competitive industries is
answer
relatively easy because economies of scale are few.
question
Which of the following produce variations of a particular product?
answer
Monopolistically competitive firms
question
Entry to and exit from monopolistically competitive industries is ______.
answer
relatively easy
question
The goal of advertising a product to differentiate it from competitor's products so that price is less of a factor when a consumer makes a purchase is considered ______ competition.
answer
nonprice
question
A firm with more courteous and helpful clerks than its rivals enables the firm to differentiate their good based on which of the following?
answer
service
question
Industry concentration measures the extent to which ______.
answer
the largest firms account for industry output
question
In monopolistically competitive industries, small stores with high prices can compete with larger stores by
answer
having very convenient locations for customers.
question
If the four largest firms in an industry produce 20, 10, 7, and 3 units of output, respectively, and total industry output is 100 units, then the four-firm concentration ratio equals ______.
answer
40%
question
Entry into monopolistically competitive industries is
answer
easy compared to oligopoly.
question
The four-firm concentration ratio, expressed as a percentage, is the ratio of the total industry ______ of the four largest firms in an industry relative to total industry sales.
answer
Blank 1: sales, output, or production
question
Entry of new firms into monopolistically competitive industries is relatively easy because ______.
answer
capital requirements are low
question
True or false: Concentration ratios that use national market share numbers are of limited help because they do not account for the fact that competition in many industries is concentrated in local markets.
answer
True
question
________ competition is competition illustrated through product differentiation and advertising.
answer
nonprice
question
Suppose an industry has 10 firms and each has a 10% share of the market. This industry's Herfindahl index is _____
answer
1000
question
The four-firm concentration ratio and the Herfindahl index measure ______.
answer
industry concentration
question
The Herfindahl index equals ______.
answer
sum of the squared percentage market shares of all firms in an industry
question
Suppose an industry has ten firms. Three of the firms produce 200 units of output each, one produces 150 units, two of the firms produce 75 units each, and four of the firms produce 25 units each. The four-firm concentration ratio for this industry equals ______.
answer
75%
question
In general, industries that typically have lower Herfindahl index values are ______.
answer
monopolistically competitive rather than oligopolistic
question
When measuring industry concentration, the ____ is the ratio of sales of the four largest firms in an industry relative to total industry sales.
answer
four-firm concentration ratio
question
A monopolistic competitor's demand curve is ______.
answer
more elastic than that of a pure monopoly but less elastic than that of a firm in pure competition
question
Concentration ratios that use national market share numbers are limited in usefulness because they ______.
answer
fail to account for highly localized industries
question
The elasticities of the demand curves for firms in monopolistically competitive (MC) industries will become more like that of firms in pure competition as ______.
answer
the number of rivals increases and product differentiation grows weaker
question
Suppose an industry has two firms each with 50% market share. The Herfindahl index for this industry is ______.
answer
5,000
question
The monopolistically competitive firm's economic profit per unit when producing at Q1 units of output ______.
answer
is the difference between P1 and A1
question
Which of the following is a measure of industry concentration that equals the sum of the squared percentage market shares of all firms in the industry?
answer
Herfindahl index
question
If a monopolistically competitive firm is producing where its marginal revenue is less than its marginal cost, then the firm
answer
should produce less output to increase profits or reduce losses.
question
Which statement is true about an industry and the Herfindahl index?
answer
The lower the index, the more likely the industry is monopolistically competitive.
question
What will happen to a monopolistically competitive firm in the long run?
answer
It will only break even.
question
The demand curve faced by a monopolistically competitive firm is _____.
answer
highly but not perfectly elastic.
question
B-Balls, a manufacturer of athletic balls, is facing increased competition due to the entry of several new firms into the industry. These new competitors have resulted in reduced demand for B-Balls' basketballs, and the company is losing money. Which of the following steps should B-Balls take regarding price in order to minimize losses until some firms exit the industry?
answer
Set its price at its new reduced level of demand where the MC curve intersects the MR curve
question
Demand for monopolistically competitive firms is ______.
answer
less elastic than demand for firms in pure competition due to fewer rivals and relative product differentiation
question
A monopolistically competitive firm may be able to continue earning greater than a normal profit in the long run ______.
answer
through further product differentiation
question
In the figure given, what is the economic profit of a monopolistically competitive firm when it is producing optimally?
answer
(P1- A1) x Q1
question
The equality of price and minimum average total cost yields ________ efficiency; the equality of price and marginal cost yields _______ efficiency. (Enter one word in each blank.)
answer
Blank 1: productive
Blank 2: allocative
Blank 2: allocative
question
In the short run, monopolistically competitive firms maximize profits or minimize losses by producing the output level where
answer
marginal revenue equals marginal cost.
question
Achieving economic efficiency that uses the right amount of scarce resources to produce the right amount of output requires a triple equality. Which three components must be equal?
answer
1) Price
2)Minimum average total cost
3) Marginal cost
2)Minimum average total cost
3) Marginal cost
question
In long-run equilibrium, monopolistically competitive firms will show a(n) _____.
answer
normal profit
question
Allocative efficiency is achieved in the short run when the equality of which of the following occurs?
answer
P = MC
question
B-Balls, a manufacturer of athletic balls, is facing increased competition due to the entry of several new firms into the industry. These new competitors have resulted in reduced demand for B-Balls' basketballs, and the company is losing money. What should B-Balls do in regard to output for their basketballs to help minimize losses until some firms exit the industry?
answer
They should reduce output to wherever their new MR curve equals the MC curve caused by a leftward shift in demand.
question
In the long run, a monopolistic competitor fails to achieve which of the following?
answer
Productive efficiency
Allocative efficiency
Allocative efficiency
question
Which factors contribute to the likelihood of a monopolistically competitive firm sustaining a greater than normal profit in the long run?
answer
Sufficient product differentiation that other firms cannot duplicate
Increased financial barriers to entry due to product differentiation
Increased financial barriers to entry due to product differentiation
question
Monopolistically competitive firms are not productively efficient because output is less than society's optimal level because a producer's ______.
answer
average total cost per unit is not at its lowest possible cost
question
When a firm's price is equal to its minimum average total cost of producing a product, ___ exists.
answer
productive efficiency
question
Economic efficiency occurs when firms produce ______.
answer
where P = MC = minimum ATC
question
When Mary tried to get an appointment with a local dentist she was told that the earliest the doctor could see her was in three weeks. This may have been due to a lack of ______.
answer
excess capacity
question
The equality of price and marginal cost yields _______ _ (allocative/productive) efficiency.
answer
Blank 1: allocative
question
When plant and equipment are underutilized because firms are producing less than the minimum-ATC output, this is known as having ______.
answer
productive inefficiency
excess capacity
excess capacity
question
Productive efficiency in monopolistically competitive markets does not occur in the long run because firms set the price
answer
on the demand curve where MR=MC to maximize economic profit, making output less than optimal from society's perspective.
question
Managers can identify excess capacity by measuring the gap between
answer
the minimum average total cost output and the profit-maximizing output.
question
Monopolistically competitive firms do not achieve allocative efficiency because the _____.
answer
price for a monopolistically competitive firm exceeds the marginal cost
question
Which of the following factors is most likely to help a monopolistically competitive firm postpone earning only a normal profit?
answer
Product differentiation
question
A major trade-off that occurs in monopolistically competitive industries is that, as product differentiation increases,
answer
excess capacity also increases.
question
Which of the following best exemplifies a firm with excess capacity?
answer
A fast-food restaurant where customers never have to wait to place an order.
question
Monopolistically competitive firms to engage in ______ competition by means of product differentiation and advertising, which makes the market situation complex.
answer
nonprice
question
Excess capacity is best described as underused plant resources that are a result of ______.
answer
a firm producing less output than what is associated with achieving minimum average total cost
question
In the figure, excess capacity
answer
is the gap between Q3 and Q4.
question
Why do firms engage in product differentiation if it adds to the firm's costs?
answer
Increased differentiation may increase demand enough to compensate for the added costs.
question
Which of the following represents the most significant benefits to society generated by monopolistically competitive markets?
answer
Product differentiation
question
In order for a monopolistically competitive firm to maximize profits, it must juggle which of the following factors?
answer
the selling price of the product
the level of advertising
the variety of product
the level of advertising
the variety of product
Order an Essay Now & Get These Features For Free:
Turnitin Report
Formatting
Title Page
Citation
Outline
