Category: Monopoly & Competition

A. at the efficient scale and charge a price equal to marginal cost
B. at the efficient scale and charge a price above marginal cost
C. With excess capacity and charge a price above marginal cost
D. With excess capacity and charge a price equal to marginal cost

A. Since price is above marginal cost surplus is redistributed from buyers to sellers
B. monopolistically competitive firms earn economic profits in the long run
C. monopolistically competitive firms produce beyond their efficient scale
D. excess of the cost of production and this causes a deadweight loss.

A. there are too many firms in the market and market efficiency could be increased if firms exited the market
B. the number of firms in the market is optimal and the market is efficient
C. There are too few firms in the market and market efficiency could be be increased with additional entry
D. The only way to improve efficiency in this market is for the government to regulate it like a natural monopoly.

A. the producer of a highly differentiated consumer product
B. the manufacturer of an undifferentiated consumer commodity
C. a perfect competitor
D. The manufacturer of an industrial product
E. The producer of a low-quality product that costs the same to produce as a similar high-quality product

A. there are many sellers in a monopolistically competitive market and there is free entry and exit in the market just like a competitive market
B. Monopolistically competitive firms face a downward-sloping demand curve just like competitive firms.
C. Monopolistically competitive firms charge prices equal to the minimum of their average total cost just like competitive firms.
D. The products are differentiated in a monopolistically competitive market just like in a competitive market.

A. breakfast
B. cotton
C. video games
D. beer

A. the monopolist faces a downward-sloping demand curve while the monopolistic competitor faces an elastic demand curve
B. the monopolist charges a price above marginal cost while the monopolistic competitor charges a price equal to marginal cost
C. The monopolist makes economic profits in the long run while the monopolistic competitor makes zero economic profits in the long run
D. Both the monopolist and the monopolistic competitor operate at the efficient scale

A. Advertising manipulates people’s tastes to create a desire that otherwise would not exist
B. Advertising increase competition Which causes unnecessary bankruptcies and layoffs.
C. Advertising increases brand loyalty causes demand to be more inelastic and thus, increase mark-up over marginal cost.
All of these answers are criticisms of advertising and brand names

A. monopolistically competitive firms charge prices equal to their marginal costs just like monopolists
B. a monopolistically competitive firms faces a downward-sloping demand curve for its differentiated product and so does a monopolist
C. monopolistically competitive markets have free entry and exit just like a monopolistic market
D. monopolistically competitive firms produce beyond their efficient scale and so do monopolists

A. all of these answers
B. are useful even in socialist economics such as the former Soviet Union
C. provide information about the quality of the product
give firms incentive to maintain high quality