ECON101 Lecture Notes - Lecture 14: Monopolistic Competition, Average Cost, Demand Curve

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OC2146671

16 Dec 2017

School

University of Waterloo

Department

Economics

Course

ECON101

Professor

wokiakumase

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Monopolistic competition a market structure in which. A large number of firms compete o. The government can deregulate the economy to let more firms enter the market, remove economic profit from monopoly. If few firms are able to enter (less than 5) there is an oligopoly. If more firms enter, there is a monopolistic competition. Firms compete on product quality, price, and marketing. Each firm supplies a small part of the total industry output. Each firm has only limited power to influence price. Each firm"s price can deviate from the average price of other firms by a small amount business. If the price is set too high, the firms lose some market share but don"t go out of. If the price is set too low, the firms gain some market share but not all the benefits of the competitor. Market share should be exploited to gain an economic profit.

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12) Which of the following types of economic regulation is most likely to encourage firms to engage in cost cutting? A) entry and output restrictions B) rate of return regulation C) price cap regulation D) None of the above encourages cost cutting.

13) In monopolistic competition, firms compete on the basis of A) price only. B) price, quality, and marketing.
C) marketing only. D) quality and marketing, but not price.

14) Which of the following statements is FALSE concerning monopolistic competition? A) There are many firms. B) Firms sell a differentiated product. C) Each firm's actions influence rival firms. D) Firms are free to enter and exit.

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.

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All of the following describe monopolistic competition except

Use letters in alphabetical order to select options

A
that firms take price as given.
B
that firms produce a highly differentiated product
C
that the market supports a large number of firms.
D
that firms can enter or exit freely into the market.

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ECON101 Lecture Notes - Lecture 14: Monopolistic Competition, Average Cost, Demand Curve

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