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Exam 26: Monopolistic Competition

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Question 61

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Low concentration ratios are typical of monopolistic competition.

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Question 62

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If new firms enter a monopolistically competitive market,the demand curves for the existing firms will shift to the

A) Left and become more price-inelastic.
B) Left,and there will be no change in price elasticity.
C) Left and become more price-elastic.

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Question 63

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In monopolistic competition,modest changes in the output or price of any single firm will have no significant influence on the sales of other firms.

Describe the typical demand curve facing an individual firm in perfectly competitive,monopoly,and monopolistically competitive markets.Explain what the shape of each firm's demand curve indicates about the amount of market power each firm possesses.

A monopolistically competitive firm confronts a downward-sloping demand curve and as a result has some market power.

Monopolistically competitive firms want to behave like a cartel,choosing a rate of output that maximizes total profit for all of the firms in the market.

An In the News article titled "Water,Water Everywhere" refers to the use of advertising.When a firm successfully advertises its product,the price elasticity of demand becomes

A monopolistically competitive firm that runs a successful advertising campaign creates enormous goodwill,but this goodwill does little to increase the value of the company.

One of the main differences between an oligopoly and a monopolistically competitive firm is that a monopolistically competitive firm

Large cities typically have many drugstores that offer different levels of service and product selection.The drugstore market in big cities can best be classified as

- Refer to Table 26.1.In order to maximize profit,Will's Beach Ball Company should produce _______ and charge a price of _______ each.

Cross-price elasticity is very low in monopolistic competition.

Imperfectly competitive firms engage in nonprice competition.

Monopolistically competitive firms are productively inefficient because long-run equilibrium occurs at an output rate where

One of the reasons for low cross-price elasticity in monopolistic competition and high cross-price elasticity in perfect competition is that

-Which firm in Figure 26.5 is producing at the output level that maximizes production efficiency?

Nonprice competition results in

Entry into a market characterized by monopolistic competition is generally

Monopolistic competition results in allocative efficiency.

If new firms enter a monopolistically competitive market,the demand curves for the existing firms will