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Exam 11: Imperfect Competition

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Question 31

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In what way does the theory of the kinked-demand curve explain price stability in an oligopoly industry?

A) Because if the firm either raises or lowers its price,its total revenue will decrease.
B) It assumes that rival firms will match any price increase and ignore any price decrease.
C) It assumes that firms are in collusion with each other.
D) It assumes that demand is inelastic above the established price and elastic below it.

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Question 32

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What are some of the arguments for and against advertising?

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Arguments in favour of advertising inclu...

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Question 33

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What are the main features of an oligopoly?

-Refer to Figure 11.10 to answer this question.What price will the firm charge?

The franchise system attempts to limit the entry of new firms into an existing industry.

From 1990 to 2005,what manufacturing industry has become four times as concentrated?

Draw a linear demand curve,marginal revenue curve,marginal cost curve,and an average total cost curve for a monopolistically competitive firm in the long-run.Clearly identify the excess capacity that occurs with monopolistic competition.

"Since monopolistically competitive firms do not earn economic profits in the long-run,they are both allocatively and productively efficient." Evaluate this statement.

What is true about both perfectly competitive and monopolistically competitive firms in long-run equilibrium?

Draw a linear demand curve,marginal revenue curve,marginal cost curve,average total cost curve,and an average variable cost curve for a monopolistic competitor making an economic loss in the short run.

Imperfect competition is characterized by firms competing on price.

-Refer to the graph above to answer this question.Which one of the following statements is correct in the long run?

Below are data for a monopolistically competitive firm. -Refer to the information above to answer this question.What is true if the firm is producing at the profit-maximizing output?

The following graph shows the costs and revenues of a typical firm operating in a monopolistically competitive industry. -Refer to the graph above to answer this question.Which of the following statements is correct?

Demonstrate graphically and explain verbally the case of a monopolistically competitive firm earning a positive economic profit.Is this firm in a short run or a long-run equilibrium? How does this case differ from the monopoly market outcome?

All of the following,except one,are examples of product differentiation.Which is the exception?

Explain why there is excess capacity in a monopolistically competitive market structure in the long-run?

The following information is for a monopolistically competitive firm operating in the long-run.When: MC = MR,Q = 60 MC = P,Q = 85 AC = MC,Q = 90 a)What output is economic capacity? b)What is the amount of the firm's excess capacity?

A monopolistic competitive firm is producing 30 units when MR = MC = $30.At that level of output,the price is $60,average total cost is $75,and average variable cost is $65.How much economic profit is the monopolistic competitive firm making? Should the firm continue to operate?

The assumption that firms attempt to maximize sales revenue underlies much of the analysis in microeconomics.