25 Flashcards
The more the firm differentiates its products, the poorer other firms’ products are as substitutes. This implies a more relatively ______
Inelastic demand
The greater the monopolistically competitive firm’s success at product differentiation the lower is the firm’s _____
Price elasticity of demand
The downward slope of the demand curve of a monopolistically competitive firm implies that the firm has _____, and therefore advertising may ____ profits
Some monopoly power over price
May increase
Which of the following is not a characteristic of a monopolistically competitive market?
A) many sellers
B) no barriers to entry
C) long - run profits likely to be positive
D) differentiated products
C) long - run profits likely to be positive
Monopolistic competition is similar to perfect competition because in both industry structures, there are ___
No barriers to entry
In the short run, a monopolistically competitive firm will select the rate of output where _____ equals _____
Marginal revenue equals marginal cost
Credence goods are goods that consumers find ___
Difficult to assess properly
The advertising of credence goods contains _____
Both informational and persuasive advertising, so as to provide detailed information and at the same time persuade the consumer to try the product
Experience goods are goods that consumers ____
Must consume in order to assess them properly
The fact that a monopolistically competitive firm does not produce at the minimum ATC can be viewed as the cost of generating A) product differentiation and variety B) homogenous products C) economies of scale D) all of the above
A) product differentiation and variety
A firm that produces an information product will earn ____ economic profits in the long run
Zero
Information products use information-intensive inputs and are characterized by ____ fixed costs and/but _____ marginal costs
High
But low
In the long run, a perfectly competitive market produces at _____, whereas the monopolistic competitive firm does not
A) an output level at which positive economic profits exist
B) the point at which MR = MC
C) the output at which the lowest ATC of production is reached
D) zero economic profits
C) the output at which the lowest ATC of production is reached
All of the following are key characteristics of a monopolistically competitive industry EXCEPT A) the existence of close substitutes B) a differentiated product C) a large number of firms D) a homogeneous product
D) a homogeneous product
