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Terms in this set (28)
a market structure in which many firms sell products that are similar but not identical
three attributes of a monopolistically competitive market
1) many firms
2) differentiated products
3) free entry
Monopolistic competition differs from perfect competition because in monopolistically competitive markets...
each of the sellers offers a somewhat different product
In monopoly and monopolistic competition sellers are price _________
monopolistically competitive market is different from a perfectly competitive market because its demand curve is ____________
The profit-maximizing rule for a firm in a monopolistically competitive market is to always select the quantity at which...
MR = MC
A monopolistically competitive firm chooses...
quantity AND price
In monopolistically competitive markets, free entry and exit suggests that...
all firms earn zero economic profits in the long run
Since a firm in a monopolistically competitive market faces a...
downward-sloping demand curve, it will always operate with excess capacity
In the long run, a firm in a PERFECTLY competitive market operates...
at its efficient scale
In the long run, a firm in a MONOPOLISTCALLY competitive firm operates...
with excess capacity
Product differentiation in monopolistically competitive markets ensures that, for profit-maximizing firms...
price will exceed marginal cost
The deadweight loss that is associated with a monopolistically competitive market is a result of...
price exceeding marginal cost
The administrative burden of regulating price in a monopolistically competitive market is...
large because of the large number of firms that produce differentiated products
A business-stealing externality...
is the negative externality associated with entry of new firms in a monopolistically competitive market
Which two curves are tangent to each other in a monopolistically competitive market with zero economic profit?
demand and ATC
Professional organizations and producer groups have an incentive to restrict advertising in order to...
reduce competition on the basis of price.
In the study done by Lee Benham on advertising for eyeglasses...
advertising decreased the average price
Advertising that uses celebrity endorsements is most likely intended to...
provide a signal of product quality
In which market structure can firms earn economic profits in the long run?
In which of market structure do firms produce the welfare-maximizing level of output?
In the long run, firms in monopolistic competition will see their price...
become equal to their ATC
If firms in monopolistic competition are enjoying positive economic profits, in the long run...
this will attract new firms into the industry, causing prices to drop and profits to disappear
Firms in monopolistic competition in long run equilibrium ________ than firms in perfect competition
In monopolistic competition in long run equilibrium, the price will be equal to...
A major critique of advertising is that
it manipulates people's tastes, leading people to make bad choices
A major argument in favor of advertising is that
it provides information to consumers that allows them to make better choices
Branding can be good for society because
it provides useful information to consumers about the quality of branded goods
Recommended textbook explanations
Principles of Economics
N. Gregory Mankiw
Principles of Macroeconomics
N. Gregory Mankiw
Principles of Economics
David Shapiro, Steven Greenlaw
Gary E. Clayton
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