4, = (11-7) Show Excess capacity: Is equal to the difference between the profit-maximizing level of output and the productively efficient level of output. The long-run equilibrium price: In a perfectly competitive market is that price where long-run average cost is minimized. In this example, this occurs when price equals $1.10. Consequently, the firm produces 11 thousand bottles of shampoo. The productively efficient level of output: Where
production occurs at lowest average total cost. This occurs when 11 thousand bottles of shampoo are produced. Explanations in Notes
Terms in this set (37)Which of the following measures is conceptually the same as price? marginal revenue average revenue Refer to the table below. What is the average revenue associated with the sixth unit of output produced and sold? $3.00 $3.00 If marginal revenue slopes downward, which of the following is true? The firm must decrease its price to sell a larger quantity. The firm must decrease its price to sell a larger quantity. Refer to the graph below. Which level of output indicates excess capacity? Q1 Q1 Which of the following are characteristics of monopolistic competition? high barriers to entry firms sell similar, but not identical, products Which type of efficiency is achieved by a monopolistically competitive firm in the long run? allocative efficiency neither allocative nor productive efficiency For what type of market structure is demand curve the same as marginal revenue? monopolistic competition perfect competition When a monopolistically competitive firm decreases price, good and bad things happen. Which of the following is considered a bad thing for the firm? the price effect the price effect Refer to the graphs below. Which graph depicts a situation in which some firms will exit the industry? the graph on the left the graph in the middle Which of the following terms best describes the additional revenue associated with selling an additional unit of output? price marginal revenue Refer to the graph below. In order to maximize profit, what price should the firm charge? $18 $15 Refer to the graphs below. Which graph best depicts the profit or loss situation for a monopolistically competitive firm in the long run? the graph on the left the graph in the middle Why does a monopolistically competitive firm have a downward-sloping demand curve? because its customers only buy goods that are being discounted from their original prices because changing the price will affect the quantity sold because the firm is a price taker, like a wheat farmer because the firm's level of output produced depends on its cost structure because changing the price will affect the quantity sold
What is marginal cost? the cost per unit of output produced the increase in total cost resulting from producing one more unit of output the impact of additional output on total fixed cost the cost of production that is independent of the level of output produced the increase in total cost resulting from producing one more unit of output Refer to the graph below. According to this graph, what will happen if Starbucks increases the price of caffè lattes? It will not lose any customers. It will lose some, but not all, of its customers. Refer to the table below. What is the marginal revenue associated with the sixth unit of output produced and sold? $3.00 $0.50 Refer to the graph below. A decrease in price from $3.50 to $3.00 per cup results in a gain and a loss of revenue. Which area represents the revenue gain? area A area B Refer to the graph below. Assuming the computer industry is monopolistically competitive, which set of demand and marginal revenue curves for a typical firm is more consistent with long-run equilibrium in the computer industry? D1 and MR1 D2 and MR2 Refer to the table below. When is average total cost minimized? at 1 unit of output at 6 units of output When a monopolistically competitive firm decreases price, good and bad things happen. Which of the following is considered a good thing for the firm? the price effect the output effect Refer to the graphs below. Which firm is a monopolistic competitor operating in the long run? the firm on the left the firm on the left Refer to the table below. What level of output should be produced in order to maximize profit? 1 unit of output 5 units of output How does the entry of new coffeehouses affect the profits of existing coffeehouses? Entry will increase the profits of existing coffeehouses by shifting the market demand curve for coffee to the right. Entry will increase the profits of existing coffeehouses by shifting each of their individual demand curves to the right. Entry will decrease the profits of existing coffeehouses by shifting each of their individual demand curves to the left and making the demand curves more elastic. Entry will not affect the profits of existing coffeehouses. Entry will increase the profits of existing coffeehouses by shifting the market demand curve for coffee to the right. Refer to the graphs below. Which graph best depicts a firm in a monopolistically competitive industry that has an incentive to exit the industry in the long run? the graph on the left the graph on the left Refer to the graphs below. Which points on the graph coincide with productive efficiency? point A on both graphs point A on both graphs Which of the following types of firms use the marginal revenue equals marginal cost approach to maximize profits? perfectly competitive firms both perfectly competitive and monopolistically competitive firms Is zero economic profit inevitable in the long run for a monopolistically competitive firm? Yes; there is nothing the firm can do to avoid zero economic profit in the long run. No; a firm could try to continue making a profit in the long run by producing a product identical to those of competing firms. No; a firm could try to continue making a profit in the long run by reducing production costs and improving its products. No; a firm could try to continue making a profit in the long run by simply offering goods that are cheaper to produce, even if they have less value than those offered by competing firms. No; a firm could try to continue making a profit in the long run by producing a product identical to those of competing firms. If a firm has the ability to affect the price of the good or service it sells, what is the relationship between its marginal revenue curve and its demand curve? The firm
will have a marginal revenue curve that is above its demand curve. The firm will have a marginal revenue curve that is below its demand curve. Refer to the graph below. Assume that the firm is producing 600 units. What should the firm do in order to maximize profit? The firm should increase output, because at 600 units, price is above marginal cost. The firm should increase the level of output, because at 600 units, marginal revenue is greater than marginal cost What trade-offs do consumers face when buying a product from a monopolistically competitive firm? Consumers pay a lower price but also have fewer choices. Consumers pay a price greater than marginal cost but also have choices more suited to their tastes. Refer to the graph below. Assume that the firm represented by the cost and demand curves below is maximizing profit. Which area represents the formula: (P - ATC) × Q? area A area A Refer to the graphs below. Assuming both firms are producing 5 cups per week, which firm is maximizing profits? the firm on the left both firms Refer to the graphs below, which represent the situations facing typical firms in three different monopolistically competitive industries. Which graph best represents the situation where new firms are likely to enter the industry? the graph on the left the graph on the right
Suppose you invest $200,000 in a business. The return you could earn each year on a similar investment using that money is 10 percent, or $20,000. In an economic sense, the $20,000 is an economic cost. an economic cost. Refer to the graph below. A decrease in price from $3.50 to $3.00 per cup results in a gain and a loss of revenue. Which area represents the loss of revenue? area A area A Refer to the graphs below. Which graph best depicts the relationship between price and average total cost in the long run for a monopolistically competitive firm? the graph on the left the graph on the left Refer to the graph below. The loss in revenue from decreasing price is greater than the gain in revenue from increasing price whenever marginal revenue is positive. marginal revenue is negative. Students also viewedRécap cours Lopez (p. 298-299)34 terms alix_lgy Ch. 26: Management of Patients With Dysrhythmias a…40 terms mikeadams76 Final Exam129 terms mikeadams76 Orifices nerfs crâniens11 terms mathilde_znsch Sets found in the same folderECON2010 Chapter 14: Oligopoly22 terms dankunz92 CH 0128 terms KAD95 CH 0228 terms KAD95 CH 0330 terms KAD95 Other sets by this creatorFINAL60 terms KAD95 Exam 239 terms KAD95 Chapter 3 - Ratios9 terms KAD95 FINAL115 terms KAD95 Verified questions
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What is the profitWhat is the profit maximization rule for a monopolistically competitive firm? To produce a quantity such that marginal revenue = marginal cost.
What is the monopolist's profitA monopolist maximizes its profits by producing to the point at which marginal revenue equals marginal cost. The monopolist then charges the maximum price for this amount of output, which is the price that consumers are willing to pay for that quantity of output.
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What does a monopolistically competitive firm do to maximize profit quizlet?
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