# ECON HW 4

Total word count: 435
Pages: 2

### Calculate the Price

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275 words
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 Monopolistic competition is characterized by a: large number of firms and low entry barriers. A monopolistically competitive firm’s marginal revenue curve: is downsloping and lies below the demand curve In short-run equilibrium, the price charged by the monopolistically competitive firm: may be either equal to ATC, less than ATC, or more than ATC. In long-run equilibrium, the price charged by the monopolistically competitive firm: will be equal to ATC. The monopolistically competitive seller maximizes profit by producing at the point where: marginal revenue equals marginal cost. In long-run equilibrium a monopolistically competitive firm will: have excess production capacity. Monopolistically competitive industries are inefficient because: monopolistically competitive industries are overpopulated with firms whose plants are underutilized. The economic inefficiencies of monopolistic competition may be offset by the fact that: consumers have a number of variations of the product from which to choose. Oligopolistic industries are characterized by: a few dominant firms and substantial entry barriers. Oligopoly is difficult to analyze primarily because: the price and output decisions of any one firm depend on the reactions of its rivals. Game theory: is the analysis of how people (or firms) behave in strategic situations. Suppose an oligopolistic producer assumes its rivals will ignore a price increase but match a price cut. In this case the firm perceives its: demand curve as kinked, being steeper below the going price than above. If an oligopoly is faced with a kinked-demand curve that is relatively elastic above, and relatively inelastic below, the going price, then it will: decrease total revenue by either increasing or decreasing price. The kinked-demand curve model helps to explain price rigidity because: there is a gap in the marginal revenue curve within which changes in marginal cost will not affect output or price. Oligopolistic firms engage in collusion to: earn greater profits. Advertising can enhance economic efficiency when it: expands sales such that firms achieve substantial economies of scale. Please review page 234. Advertising can impede economic efficiency when it: leads to greater monopoly power. Pure monopoly means: a single firm producing a product for which there are no close substitutes. Which of the following is a characteristic of pure monopoly? barriers to entry A natural monopoly occurs when: long-run average costs decline continuously through the range of demand. A nondiscriminating pure monopolist’s demand curve: lies above its marginal revenue curve. The marginal revenue curve for a monopolist: becomes negative when output increases beyond some particular level. Because the monopolist’s demand curve is downsloping: price must be lowered to sell more output. When total revenue is increasing: marginal revenue is positive. In the short run a pure monopolist: …

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