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6) Product differentiation causes the seller of a good to face
what type of demand curve?
| d) | Any of the above could be correct since product differentiation does not affect the shape of the demand curve. |
7) Figure 16-2. The figure is drawn for a
monopolistically competitive firm.
Refer to Figure 16-2. Suppose that average
total cost is $36 when Q=24. What is the profit-maximizing price
and resulting profit?
8) Figure 16-2. The figure is drawn for a
monopolistically competitive firm.
Refer to Figure 16-2. If the average total cost
is $30 at the profit-maximizing quantity, then the firm’s maximum
profit is
9) Figure 16-2. The figure is drawn for a
monopolistically competitive firm.
Refer to Figure 16-2. Suppose you were to add
the ATC curve to the diagram to show the firm in a situation of
long-run equilibrium. You would draw the ATC curve
| a) | with its minimum at the point (Q = 24, P = $36). |
| b) | with its minimum at the point (Q = 24, P = $24). |
| c) | tangent to the demand curve at the point (Q = 24, P = $36). |
| d) | tangent to the demand curve at the point (Q = 32, P = $32). |
10) Figure 16-2. The figure is drawn for a
monopolistically competitive firm.
Refer to Figure 16-2. If the ATC=40 at the
profit-maximizing level of output, which of the following will
occur in the long run in this industry?
| a) | Firms will exit this industry. |
| b) | Firms will enter this industry. |
| c) | This firm will continue to earn positive economic profits. |
| d) | This firm will incur losses. |
64 48 MC 32 24 16 Demand MR 1624 32 40 48 56 б4e
Answer
Q6
Answer
Option a
The demand curve is downward sloping because the firms have some
power over prices and the demand curve is downward sloping.
Q7
Answer
Option d
The firm produces at MR=MC
where
Q=24 units, P=$36, ATC=36
Profit=(P-ATC)*Q
=(36-36)*24=0
—————
Q8
Answer
Option c
Profit=(36-30)*24
=$144
————
Q9
Answer
Option c
tangent to the demand curve at the point (Q = 24, P = $36).
A monopolistic competitive long-run equilibrium is at P=ATC and
MR=MC, but the P>MR or P>MC or ATC>MC
—————-
Q10
option a
Profit=(36-40)*24
=-$96
the firm is making losses so some of the firms in the industry will
exit in the long run and the demand curve of each firm will shift
out so the price will increase and there will be zero economic
profit in the long run.
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