question
Explain why firms in a monopolistically competitive market may be able to charge Slightly different price as well prices will be identical in a perfectly competitive market
answer
If consumers believe that products are slightly different from one another, they will not switch from one to another solely based on price. Thus, demand will be somewhat less elastic than the perfectly elastic demand facing perfectly competitive firms.
question
In the long run, monopolistically competitive firm will produce where price_______
answer
Equals average cost and is greater than the marginal cost
question
Outline the advantages and disadvantages of advertising from the point of view of economic efficiency.
answer
The advantages of advertising our creation and awareness of prices and qualities of products. In addition, a wide range of choices permits more people to find Products that will fill their particular needs
The disadvantages of a monopolistic competitive Industry is that prices will be higher than they would be in a perfectly competitive industry. In addition, the prices will be larger than marginal cost and thus firms will not be producing at a level of output that is economically efficient.
The disadvantages of a monopolistic competitive Industry is that prices will be higher than they would be in a perfectly competitive industry. In addition, the prices will be larger than marginal cost and thus firms will not be producing at a level of output that is economically efficient.
question
Explain in your own words why a cartel may fail in its goals
answer
If a cartel wants to maximize profits for the industry, it will set a monopoly price and produce the monopoly quantity of output. However, there's always the incentive for a single firm to cheat on the agreement and the cartel will potentially fall apart
question
Compare the levels of economic profit in a long run equilibrium for a perfectly competitive firm, a monopoly, a monopolistically competitive firm and an oligopoly. Economic profits will most likely be:
answer
Zero in perfect competition and monopolistic competition, perhaps positive in a monopoly and perhaps positive in oligopoly
question
Rank each type of market on their prices from highest to lowest. Assume that there was a bit of competition among the oligopolies.
answer
Monopoly
oligopoly
monopolistic competition
perfect competition
oligopoly
monopolistic competition
perfect competition
question
Rank each type of market on their industry quantities from highest to lowest. Assume that there is a bit of competition among the oligopolies.
answer
Perfect competition
monopolistic competition
oligopoly
monopoly
monopolistic competition
oligopoly
monopoly
question
Match each type of market with whether or not they can have economic profits in the short run
answer
Perfect competition - Yes
Monopolistic competition - Yes
Oligopoly - Yes
Monopoly -Yes
Monopolistic competition - Yes
Oligopoly - Yes
Monopoly -Yes
question
Match each type of market with whether or not their price equals their marginal cost.
answer
Perfect competition - No
Monopolistic competition -Yes
Oligopoly -Yes
Monopoly -No
Monopolistic competition -Yes
Oligopoly -Yes
Monopoly -No
question
Match each type of market with whether or not their average costs at all outputs are as low as possible.
answer
Perfect competition - Yes
Monopolistic competition -No
Oligopoly -No
Monopoly -No
Monopolistic competition -No
Oligopoly -No
Monopoly -No
question
Match each type of market with whether or not they achieve economic efficiency.
answer
Perfect competition - Yes
Monopolistic competition -No
Oligopoly -No
Monopoly -No
Monopolistic competition -No
Oligopoly -No
Monopoly -No
question
Match each type of market with whether or not their average costs are at a minimum at the profit-maximizing quantity in the long run.
answer
Perfect competition -No
Monopolistic competition -No
Oligopoly -Yes
Monopoly -Yes
Monopolistic competition -No
Oligopoly -Yes
Monopoly -Yes
question
Suppose that the Peached Tortilla is one of ten food trucks in the town of Happyville, and every food truck is earning substantial economic profits. What is likely to happen in the long run?
answer
New food trucks will enter the market and gradually all food trucks will earn zero economic profits
question
Tony's Gas Station and Robert's Gas Station are the only two gas stations in a small town of Westville. If Tony and Robert collude to earn more profits, which of the following would be true?
answer
Each limit the amount of gasoline available and raise prices
question
A monopolistic competitive firm will incur loss if which of the following is true?
answer
Price is lower than average total cost
question
OPEC is an example of _______
answer
A cartel
question
A large number of firms in Biergarten sell flavored beer. However, each firm faces a downward-sloping demand curve. The market for flavored beer is .
answer
Monopolistic competitive
question
In which of the following markets do sellers act as price takers?
answer
Perfect competition
question
In which of the following markets do sellers have the highest profit level?
answer
Monopoly
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