Principles of Economics 2e
2nd Edition
ISBN: 9781947172364
Author: Steven A. Greenlaw; David Shapiro
Publisher: OpenStax
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Textbook Question
Chapter 10, Problem 9RQ
If the firms in a
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If the firms in a monopolistically competitive market are earning economic profits or losses in the short run, would you expect them to continue doing so in the long run? Why?
Aside from advertising, how can monopolistically competitive firms increase demand for their products?
What factors hinder firms in monopolistic competition from earning economic profits in the long run?
Chapter 10 Solutions
Principles of Economics 2e
Ch. 10 - Suppose that, due to a successful advertising...Ch. 10 - Continuing with the scenario in question 1, in the...Ch. 10 - Consider the curve in the figure below, which...Ch. 10 - Sometimes oligopolies in the same industry are...Ch. 10 - What is the relationship between product...Ch. 10 - How is the perceived demand curve for a...Ch. 10 - How does a monopolistic competitor choose its...Ch. 10 - How can a monopolistic competitor tell whether the...Ch. 10 - If the firms in a monopolistically competitive...Ch. 10 - Is a monopolistically competitive firm...
Ch. 10 - Will the firms in an oligopoly act more like a...Ch. 10 - Does each individual in a prisoners dilemma...Ch. 10 - What stops oligopolists from acting together as a...Ch. 10 - Aside from advertising, how can monopolistically...Ch. 10 - Make a case for why monopolistically competitive...Ch. 10 - Would you rather have efficiency or variety? That...Ch. 10 - Would you expect the kinked demand curve to be...Ch. 10 - When OPEC raised the price of oil dramatically in...Ch. 10 - Andreas Day Spa began to offer a relaxing...Ch. 10 - May and Raj me the only two growers who provide...Ch. 10 - Jane and Bill are apprehended for a bank robbery....
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Similar questions
- Monopolistically competitive firms could increase the quantity they produce and potentially lower the average total cost of production. Why don't they do so?arrow_forwardWhen oil prices increased 10 fold during the 1973 – 80 energy crisis, many oil companies made huge profits. During this energy crisis, Congress considered imposing an “excess profits” tax on oil companies. If you were in Congress, would you vote for such a tax? Do unexpected monopolistic profits serve any useful function in a market economy?arrow_forwardWhy do monopolistically competitive firms spend funds for the product development and advertising when this practice only adds to the firm’s costs?arrow_forward
- Suppose you manage a local grocery store, and you learn that a very popular national grocery chain is about to open a store just a few miles away. Use the model of monopolistic competition to analyze the impact of this new store on the quantity of output your store should produce (Q) and the price your store should charge (P). What will happen to your profits? Explain your reasoning in detail. How and why do profits change? What could you do to defend your market share against the new store?arrow_forwardHow is the perceived demand curve for a monopolistically competitive firm different from the perceived demand curve for a monopoly or a perfectly competitive firm? Why?arrow_forwardYour friend Stan owns a coffee shop in a monopolistically competitive industry. One day, Stan tells you (an economist) that he is earning an economic profit and is setting his price equal to his marginal cost. Is Stan producing the profit-maximizing amount of coffee? What should he do?arrow_forward
- The following graph shows a firm operating in a monopolistically competitive market. Short term, how many haircuts will the firm perform and at what price? At this point, what will its total revenue, total cost, and total profit be? Given your answers, what would we expect to happen in the long term in this market (i.e. are we at long term equilibrium, or will we see further changes)?arrow_forwardYou are hired as a consultant to a monopolistically competitive firm. The firm reports the following information about its price, marginal cost, and average total cost. Can the firm possibly be maximizing profit? If not, what should it do to increase profit? If the firm is maximizing profit, is the market in a long-run equilibrium? If not, what will happen to restore long-run equilibrium? P < MC, P > ATC P > MC, P < ATC P = MC, P > ATC P > MC, P = ATCarrow_forwardWill there be profits in the long run in a monopolistically competitive market?arrow_forward
- An industry said to be characterized by monopolistic competition is the apparel industry. Suppose you were hired as a consultant by a firm in this industry. How would you advise the firm as to the levels of output, price, input usage, and advertising? What problems might the firm encounter?arrow_forwardMonopolistically competitive firm's are similar to monopolies in that they are able to earn economic profits in the long run. Do you agree with this statement if not, then why not?arrow_forward
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