What characterizes monopolistic competition? |
Many firms produce a particular type of product, but each maintains some independent control over its own price. |
Monopolistically competitive industries are characterized by all of the following except |
Homogenous products. |
In monopolistic competition, a firm |
Has a downward-sloping demand curve |
Which of the following industries is not an example of monopolistic competition? |
Airlines |
If there are many firms in an industry producing goods that are similar but slightly different, this is an |
Monopolistic competition |
Which of the following is not characteristic of monopolistic competition? |
Firms have zero control over price. |
A concentration ratio measures the |
Proportion of industry output produced by the largest firms |
The combined market share of the top four firms in a monopolistically competitive industry will |
20 to 40 percent. |
A monopolistically competitive industry is characterized by ________ concentration ratios and |
low; low |
A major difference between oligopoly and monopolistic competition is that monopolistically |
Have many competitors. |
Each producer in monopolistic competition has |
Some market power. |
The demand curve faced by a monopolistically competitive firm is |
Downward-sloping. |
Which of the following is similar for oligopoly and monopolistic competition? |
Both have market power. -An oligopoly is characterized by high concentration ratios, market power, and interdependence, whereas monopolistic competition is characterized by a high degree of brand loyalty, low concentration ratios, some market power, and independent product decisions. |
One of the main differences between an oligopoly and a monopolistically competitive firm is that a |
Is relatively independent; an oligopoly is interdependent |
If a monopolistically competitive firm raises its price, it will |
Lose some of its customers, but nowhere close to all its customers. |
The kinked oligopoly demand curve does not describe the demand curve for monopolistic competition |
Firms are not as interdependent as oligopolistic firms. |
A major difference between monopoly and monopolistic competition is |
The number of firms in the market. |
Entry into a market characterized by monopolistic competition is generally |
Very easy because few barriers exist. |
Monopolistically competitive firms have a "monopoly" element to them because |
Brand loyalty gives them a captive audience. |
The competitive dimension of monopolistic competition is that |
Low barriers to entry tend to push economic profits toward zero |
Which of the following most characterizes monopolistic competition? |
Product differentiation. |
Product differentiation refers to |
Features that make one product appear different from competing products in the same market. |
Product differentiation occurs when |
Buyers perceive differences in the products of several companies. |
Which of the following is an example of product differentiation? |
Two shampoos differ only in their labels, but consumers pay $0.20 more for the label they recognize. |
Large cities typically have many drugstores that offer different levels of service and product selection. |
Monopolistic competition. |
The main difference between perfect competition and monopolistic competition is |
The degree of product differentiation |
A monopolistically competitive firm can raise its price somewhat without fear of great change in unit |
Of product differentiation and brand loyalty. |
A monopolistically competitive firm can raise its price somewhat without fear of great change in unit |
Brand loyalty |
Brand loyalty usually makes the demand curve for a product |
Less price-elastic |
The cross-price elasticity of demand for the products of monopolistically competitive firms is |
Low |
Cross price elasticity measures |
The change in quantity demanded for one good due to a change in the price of another good. |
Brand loyalty |
Exists even when products are virtually identical |
When a monopolistically competitive firm advertises, it is attempting to increase |
The demand and decrease the price elasticity of demand for its product |
Firms in a monopolistically competitive market will |
Use the profit-maximizing rule MC = MR. |
A monopolistically competitive firm maximizes profits or minimizes losses in the short run by |
Producing at the output level where MR equals MC. |
If a monopolistic competitor is maximizing profit, it is producing at a point where marginal cost |
Is less than price. |
In order to maximize profit, Will’s Beach Ball Company should produce _______ |
7 beach balls; $10 |
At the profit-maximizing output and price, Will’s Beach Ball Company will earn |
$18 |
At the profit-maximizing output and price, Will’s Beach Ball Company will earn |
positive; entry into |
To maximize profit, Sylvie’s Shampoo Company. should produce _______ |
7; $20 |
At the profit-maximizing output and price, Sylvie’s Shampoo Company. will earn |
$36. |
At the profit-maximizing output and price, Sylvie’s Shampoo Company. will earn |
positive; entry into |
Entry into a market characterized by monopolistic competition |
Is frequent because barriers to entry are low |
In monopolistic competition, a firm’s demand curve is tangent to the ATC curve in the long run |
Entry eliminates economic profit, and exit eliminates losses. |
ECON-micro ch.12
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