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Figure 11-7 Figure 11-7 Figure 11-7 shows short-run cost and demand curves for a monopolistically competitive firm in the footwear market. -Refer to Figure 11-7.Which of the following statements describes the best course of action for the firm depicted in the diagram? A) The firm should exit the industry because its price is less than its average total cost. B) The firm should minimize its losses by producing Qᵧ units and charging a price of P₀. C) The firm should minimize its losses by producing Qᵧ units and charging a price of P₂. D) The firm should minimize its losses by producing Qᵧ units and charging a price of P₁. Figure 11-7 shows short-run cost and demand curves for a monopolistically competitive firm in the footwear market. -Refer to Figure 11-7.Which of the following statements describes the best course of action for the firm depicted in the diagram?


A) The firm should exit the industry because its price is less than its average total cost.
B) The firm should minimize its losses by producing Qᵧ units and charging a price of P₀.
C) The firm should minimize its losses by producing Qᵧ units and charging a price of P₂.
D) The firm should minimize its losses by producing Qᵧ units and charging a price of P₁.

E) A) and D)
F) A) and C)

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There are many wheat farmers in the world,and there are also many McDonald's restaurants in the world.Why,then,does a McDonald's restaurant face a downward-sloping demand curve while a wheat farmer faces a horizontal demand curve?

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Wheat framers are selling identical good...

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Explain the similarities and differences between the long-run equilibrium for a perfectly competitive firm and a monopolistically competitive firm.Illustrate your answer with a graph demonstrating the long-run equilibrium for the two types of firms.

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blured image Refer to the graph above.For both types...

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Figure 11-14 Figure 11-14 Figure 11-14 illustrates a monopolistically competitive firm. -Refer to Figure 11-14.It is possible to lower the average cost of production by expanding output beyond Q₀ to Q₁.Why wouldn't a firm expand its output to Q₁? A) The firm wants to maximize accounting profit rather than economic profit. B) The firm would suffer an economic loss at Q₁ while it would break even at Q₀. C) The firm's marginal revenue would be negative at Q₁. D) Demand is not sufficient for consumers to buy Q₁. Figure 11-14 illustrates a monopolistically competitive firm. -Refer to Figure 11-14.It is possible to lower the average cost of production by expanding output beyond Q₀ to Q₁.Why wouldn't a firm expand its output to Q₁?


A) The firm wants to maximize accounting profit rather than economic profit.
B) The firm would suffer an economic loss at Q₁ while it would break even at Q₀.
C) The firm's marginal revenue would be negative at Q₁.
D) Demand is not sufficient for consumers to buy Q₁.

E) A) and B)
F) A) and C)

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The barrier to entry that allowed Alcoa to make persistent economic profits was ownership of an essential input.

A) True
B) False

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Monopolistically competitive firms achieve allocative efficiency but not productive efficiency.

A) True
B) False

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If a firm faces a downward-sloping demand curve


A) the demand for its product must be inelastic.
B) it has no control over the price or the quantity sold.
C) it must reduce its price to sell more units.
D) it will always make a profit.

E) None of the above
F) B) and D)

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Table 11-9 Table 11-9 Alpha and Beta are the only firms selling gyros in the upscale town of Delphi. Each firm must decide on whether to offer a discount to students to compete for customers. If one firm offers a discount but the other does not, then the firm that offers the discount will increase its profit. Table 11-9 shows the payoff matrix for this game. -Refer to Table 11-9.What is the Nash equilibrium in this game? A) There is no Nash equilibrium. B) Beta offers a student discount but Alpha does not. C) Alpha offers a student discount but Beta does not. D) Both Alpha and Beta offer a student discount. Alpha and Beta are the only firms selling gyros in the upscale town of Delphi. Each firm must decide on whether to offer a discount to students to compete for customers. If one firm offers a discount but the other does not, then the firm that offers the discount will increase its profit. Table 11-9 shows the payoff matrix for this game. -Refer to Table 11-9.What is the Nash equilibrium in this game?


A) There is no Nash equilibrium.
B) Beta offers a student discount but Alpha does not.
C) Alpha offers a student discount but Beta does not.
D) Both Alpha and Beta offer a student discount.

E) A) and D)
F) A) and C)

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A monopolistically competitive firm that is profitable in the short run will face competition that will eventually eliminate the firm's profits in the long run.But the firm can stave off competition and continue to earn economic profits if


A) it can successfully sue its competitors for copyright infringement.
B) it can move to another country where there is less competition.
C) it can lobby the government to establish a price floor for its product.
D) it can find new ways to differentiate its product.

E) A) and D)
F) B) and D)

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What effect does the entry of new firms in a monopolistically competitive market have on the economic profits of existing firms in the market? How might existing firms attempt to counteract this effect?

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New firms entering an industry cause the...

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Figure 11-11 Figure 11-11 -Refer to Figure 11-11.What is the productively efficient output for the firm represented in the diagram? A) Q₁ units B) Q₂ units C) Q₃ units D) Q₄ units -Refer to Figure 11-11.What is the productively efficient output for the firm represented in the diagram?


A) Q₁ units
B) Q₂ units
C) Q₃ units
D) Q₄ units

E) A) and D)
F) B) and D)

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If a firm has excess capacity,then


A) the firm expends too much of its resources on advertising its product without seeing an appreciable increase in sales.
B) the firm is not producing its minimum efficient scale of output.
C) the firm's long-run average cost of producing a given quantity exceeds its short-run cost of producing that same quantity.
D) the firm's quantity supplied exceeds its quantity demanded.

E) None of the above
F) B) and C)

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What is meant by the term "government-imposed barrier to entry"? Why would a government be willing to impose barriers to entering an industry?

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Government-imposed barriers to entry are...

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What is the most important difference between perfectly competitive markets and monopolistically competitive markets?

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In both perfectly competitive and monopo...

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Figure 11-11 Figure 11-11 -Refer to Figure 11-11.What is the allocatively efficient output for the firm represented in the diagram? A) Q₁ units B) Q₂ units C) Q₃ units D) Q₄ units -Refer to Figure 11-11.What is the allocatively efficient output for the firm represented in the diagram?


A) Q₁ units
B) Q₂ units
C) Q₃ units
D) Q₄ units

E) A) and B)
F) None of the above

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Table 11-13 Table 11-13 Two rival oligopolists in the coffee industry, Wide Awake and Zuma, have to decide on their pricing strategy. Each can choose either a high price or a low price. Table 11-13 shows the payoff matrix with the profits that each firm can expect to earn depending on the pricing strategy it adopts. -Refer to Table 11-13.Which of the following is true? A) Wide Awake's dominant strategy is to select a low price. B) Zuma's dominant strategy is to select a high price. C) Wide Awake does not have a dominant strategy. D) Zuma does not have a dominant strategy. Two rival oligopolists in the coffee industry, Wide Awake and Zuma, have to decide on their pricing strategy. Each can choose either a high price or a low price. Table 11-13 shows the payoff matrix with the profits that each firm can expect to earn depending on the pricing strategy it adopts. -Refer to Table 11-13.Which of the following is true?


A) Wide Awake's dominant strategy is to select a low price.
B) Zuma's dominant strategy is to select a high price.
C) Wide Awake does not have a dominant strategy.
D) Zuma does not have a dominant strategy.

E) None of the above
F) B) and D)

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A patent is an example of


A) how ownership of a key input creates a barrier to entry.
B) a government-imposed barrier to entry.
C) occupational licensing.
D) how market failure can lead to oligopoly.

E) A) and C)
F) A) and B)

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If an industry is made up of five identical-sized firms,the four-firm concentration ratio is


A) 5%.
B) 20%.
C) 80%.
D) 100%.

E) A) and D)
F) B) and C)

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If a perfectly competitive firm maximizes short-run profits,its marginal revenue will be positive and less than its price.

A) True
B) False

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Figure 11-17 Figure 11-17 -Refer to Figure 11-17.What is the amount of excess capacity? A) Qh - Qf units B) Qⱼ - Qf units C) Qⱼ - Qh units D) Qh - Qg units -Refer to Figure 11-17.What is the amount of excess capacity?


A) Qh - Qf units
B) Qⱼ - Qf units
C) Qⱼ - Qh units
D) Qh - Qg units

E) None of the above
F) All of the above

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