Chapter 8 Market Entry, Monopolistic Competition, and Oligopoly

| February 14, 2018

96)
What is “competitive” about a monopolistically competitive market?

97)
If you were thinking of entering the ice cream business, would you make a
product that is just like one that is already being produced? Explain.

98)
The market for chicken used to be perfectly competitive. Then producers like
Frank Perdue started marketing chicken under their name. What did they gain by
doing this?

99)
Suppose that A Cleaner World invents a new type of laundry detergent that has
an ingredient that stops stains from setting into clothes. If the laundry
detergent market is monopolistically competitive, explain what will happen to
the price of its product in the short run. What will happen in the long run?

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Figure 8.6

100)
Figure 8.6 depicts a monopolistically competitive firm in the long run.
Illustrate on the graph the firm’s price and output level in long-run
equilibrium. Explain.

101)
Referring to Figure 8.6, how much economic profit does the monopolistically
competitive firm earn in long-run equilibrium?

102)
Can a monopolistically competitive firm producing a good with lots of very
close substitutes earn large positive profits in the long run?

8.3
Trade-Offs with Entry and Monopolistic Competition

1)
A benefit to consumers of monopolistically competitive markets is that
A)
consumers only have to choose from one product.
B)
consumers have a variety of products from which to choose.
C)
goods are sold at the lowest possible average cost of production.
D)
price is equal to marginal cost in equilibrium.

2)
Consumers benefit from monopolistically competitive markets because
A)
they only have one good from which to choose.
B)
in this type of market, producers supply goods in a variety of locations or
with a variety of characteristics.
C)
in this type of market, goods are sold at a price equal to the marginal cost of
production.
D)
goods are sold at a price equal to marginal revenue.

3)
The “good news” for consumers from monopolistic competition is ________
but the “bad news” for producers is that ________.
A)
lower prices than monopoly; there are higher production costs
B)
lower prices than monopoly; there are higher travel costs
C)
lower prices than monopoly; there is less product variety
D)
greater product variety; product prices are higher

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