ECON 102 Chapter Notes - Chapter 23: Monopolistic Competition, Imperfect Competition, Perfect Competition

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goldshark321

20 Jan 2017

School

University of Illinois

Department

Economics

Course

ECON 102

Professor

Vasquez

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ECON 102 Full Course Notes

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Monopolistic competition is a type of imperfect competition such that many producers sell products that are differentiated from one another (e. g. by branding or quality) and hence are not perfect substitutes. Monopolistic competition: trade off of higher prices for more variety of goods, many sellers selling a product that is somewhat different from one another, three characteristics. S(cid:272)otty"s d(cid:396)y clea(cid:374)e(cid:396)s is o(cid:374)e of many dry cleaners in town. To diffe(cid:396)e(cid:374)tiate o(cid:374)e"s p(cid:396)odu(cid:272)t, a (cid:271)usi(cid:374)ess (cid:373)ust offe(cid:396) so(cid:373)e type of u(cid:374)i(cid:395)ue se(cid:396)(cid:448)i(cid:272)e to disti(cid:374)guish itself from its competition. In short run, equilibrium output for a firm in monopolistic competition is very similar to firm in monopoly. In long run, the monopolistically competitive firm sells its output at a price equal to the cost of production and earns zero economic (price = average total cost) Difference between perfectly competitive firm : buyers will pay a price that is slightly higher than a perfectly competitive firm.

Related Questions

1. A monopoly market structure is characterized by

a. large number of firms, standardized products, easy entry and exit.

b. large number of firms, differentiated products, easy entry and exit.

C. small number of firms, standardized or differentiated products, difficult entry.

d. one firm, a unique product without close substitutes, and impossible entry.

e. one firm, differentiated product, impossible entry.

2. Which of the following is not a characteristic of monopolistic competition?

a. Differentiated products

b. A downward-sloping demand curve for individual firms

c. Firms that are price makers

d. Impeded entry into the industry

e. A large number of firms

3. One factor that distinguishes oligopoly from other market structures is

a. the ease of entry into the market.

b. the interdependence of firms.

c. the slope of the demand curve.

d. the degree of product differentiation.

e. the amount of advertising expenditures.

lavenderbat941

13. If a monopolistic competitor is producing an output for which marginal revenue is $40 and the marginal cost is $32, to maximize profits the firm should
A. decrease the level of output.
B. keep the level of output constant.
C. continue to make $8 per unit.
D. increase the level of output.

14. A monopolistic competitor will not make an economic profit unless
A. it engages in price discrimination.
B. its marginal revenue is greater than its marginal cost.
C. it faces an inelastic demand curve.
D. its price is greater than its average total cost.

15. The definition of monopolistic competition includes
A. few firms and ease of entry and exit.
B. few firms and barriers to entry and exit.
C. many firms and barriers to entry and exit.
D. many firms and ease of entry and exit.

16. Characteristics of monopolistic competition include all of the following except
A. significant barriers to entry.
B. a relatively large number of sellers and buyers.
C. small market share for each seller.
D. differentiated products.

olivecricket650

1) A natural monopoly exists when:

a. A few firms collude to make one large firm

b. Firms enter the industry as a result of profit incentives

c. Economies of scale provide large cost advantages to having one firm produce the industry's output

d. Firms naturally maximize regardless of market structure

2) A(n) ____ is a single firm with ___, whereas a(n) ___ implies an industry with ____ firm(s) and ____ .

a. Monopoly; barriers to entry; oligopoly; few; no barriers to entry

b. Oligopoly; no barriers to entry; monopoly; many; easy entry and exit

c. Monopoly; barriers to entry; monopolistic competition; many; easy entry and exit

d. Monopolistic competitor; barriers to entry; monopoly; one; barriers to entry

3) In monopolistic competition:

a. Each firm produces a product identical to that of every other firm in the industry

b. Firms are aware of their strategic interdependence

c. Firms earn large economic profits in the long run

d. Firms earn zero economic profits in the long run

4) A monopolistically competitive industry, such as corn snack chips, and a perfectly competitive industry, like wheat farming, are alike in that:

a. There are many firms in each industry

b. Firms in both types of industries produce similar but not identical products

c. Barriers to entry in both industries are large

d. Firms in both types of industries produce identical products

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ECON 102 Chapter Notes - Chapter 23: Monopolistic Competition, Imperfect Competition, Perfect Competition

ECON 102 Full Course Notes

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