Monopolistic competition is a market structure in which a​ ______ number of firms compete and each firm produces a​ ______ product.
answer
​large; differentiated
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Firms in monopolistic competition compete on​ ______ and firms​ ______ .
answer
product​ quality, price, and​ marketing; are free to enter and exit
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Because of product​ differentiation, a firm in monopolistic competition faces​ _______ demand curve for the good it produces.
answer
a​ downward-sloping
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When firms in monopolistic competition are making positive economic profit in the short​ run, ______.
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new firms​ enter, and the demand for the good produced by each firm decreases until price equals average total cost
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Monopolistic competition might be efficient if​ _______.
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the loss that arises because the quantity produced is less than the efficient quantity is offset by the gain that arises from having a greater degree of product variety
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If in the short​ run, firms in monopolistic competition​ _______, then in the long​ run, new firms will enter the market.
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make an economic profit
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The​ ______ the good produced by each individual firm will​ ______.
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demand​ for; decrease
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In the new​ long-run equilibrium, firms​ _______.
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make zero economic profit
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A​ firm's markup is the amount by which​ ______ exceeds​ ______.
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price; marginal cost
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A firm in perfect competition has​ ______.
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no markup
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Excess capacity is the amount by which the​ _____ exceeds the quantity that the firm produces.
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efficient scale
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Which of the following firms produce at the efficient scale​?
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Dell produces 100 computers a week at which its average total cost is minimized.
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​Callaway's economic profit from​ women's golf clubs is likely to be temporary because​ ______.
answer
other firms will enter the market and demand for clubs made by Callaway will decrease
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Other than by adjusting​ price, the two main ways in which a firm in monopolistic competition competes with other firms are by​ ______ and​ ______.
answer
product​ development; advertising
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Angie bakes delicious cookies. Her total fixed cost is ​$105 a​ day, and her average variable cost is ​$1 a bag.
Few people know about Angie's Cookies and she is maximizing her profit by selling 15 bags of cookies a day for ​$8 a bag. Angie thinks that if she spends ​$20 a day on​ advertising, she can increase her market and sell 34 bags of cookies a day for ​$8 a bag. If Angie's belief about the effect of advertising is​ correct, can she increase her economic profit by​ advertising? If Angie's belief about the effect of advertising is​ correct, she ​______
answer
can increase her economic profit from zero to ​$113
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The pricing rule that achieves an efficient outcome for a regulated monopoly is the​ ______.
This rule is difficult to implement because​ ______.
answer
marginal cost pricing​ rule;
the monopoly incurs an economic loss
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An average cost pricing rule sets​ _______ equal to average total cost.
An average cost pricing rule is not an efficient way of regulating monopoly because at the quantity produced​ _______.
answer
​price; marginal benefit exceeds marginal cost
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Social interest theory is the theory that​ _____ achieves an​ _____ allocation of resources.
Capture theory is the theory that the regulation serves the​ self-interest of the producer and results in​ _____, _____, and deadweight loss.
