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    Ch. 11 Monopolistic Competition

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    A monopolistically competitive industry combines elements of both competition and monopoly. It is correct to say that the competitive element results from: a. a relatively large number of firms and the monopolistic element from product differentiation. b.

    Answer to: A monopolistically competitive industry combines elements of both competition and monopoly. It is correct to say that the competitive...

    Monopolistic competition

    A monopolistically competitive industry combines elements of both competition and monopoly. It is...

    A monopolistically competitive industry combines elements of both competition and monopoly. It is... Question:

    A monopolistically competitive industry combines elements of both competition and monopoly. It is correct to say that the competitive element results from:

    a. a relatively large number of firms and the monopolistic element from product differentiation.

    b. product differentiation and the monopolistic element from high entry barriers.

    c. a perfectly elastic demand curve and the monopolistic element from low entry barriers.

    d. a highly inelastic demand curve and the monopolistic element from advertising and product promotion.

    Market System:

    The system of exchange that consists of various types of firms selling numerous products is known as market system. Different firms in a market operates differently and also differs in their decision making process.

    Answer and Explanation:

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    Option a. a relatively large number of firms and the monopolistic element from product differentiation is correct.

    This is a correct option because...

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    Monopolistic Competition: Definition, Theory, Characteristics & Examples

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    Chapter 3 / Lesson 56

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    A monopolistic competition occurs when multiple sellers offer the same product, but each seller differentiates their product to encourage sales. Understand better this definition, the theory, characteristics, and examples of monopolistic competition.

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    Pure Monopoly

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    A single firm producing a product for which there are no close substitutes.

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    A purely competitive firm is a "price taker", while a monopolist is a "price maker". True or False?

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    True

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    Terms in this set (29)

    Pure Monopoly

    A single firm producing a product for which there are no close substitutes.

    A purely competitive firm is a "price taker", while a monopolist is a "price maker". True or False?

    True

    Purely monopolistic firm

    Faces a downsloping demand curve.

    Characteristic of pure monopoly

    Barriers to entry

    What do economies of scale, the ownership of essential raw materials, and patents have in common?

    They are all barriers to entry.

    If a nondiscriminating imperfectly competitive firm is selling its 100th unit of output for $35, its marginal revenue:

    Will be less than $35

    If a monopolist were to produce in the inelastic segment of its demand curve:

    The firm would not be maximizing profits.

    Suppose a pure monopolist is charging a price of $12 and the associated marginal revenue is $9. We thus know that:

    Total Revenue is increasing.

    If a nondiscriminating pure monopolist decides to sell one more unit of output, the marginal revenue associated with that unit will be:

    The price at which that unit is sold less the price reductions that apply to all units of output.

    If a pure monopolist can price discriminate by separating buyers into two or more groups:

    The firm will face multiple marginal revenue curves.

    Monopolistic Competition

    Many firms producing differentiated products.

    Under Monopolistic Competition, entry to the industry is:

    More Difficult than under Pure Competition but not As Difficult as under Pure Monopoly

    Nonprice Competition

    Advertising, product promotion, and changes in the real or perceived characteristics of a product.

    A Monopolistically Competitive industry combines elements of both competition and monopoly. The monopoly element results from:

    Product differentiation.

    A Monopolistically Competitive industry combines elements of both competition and monopoly. The competition element results from:

    Low entry barriers.

    Suppose that total sales in an industry in a particular year are $800m and sales by the top four sellers are $50m, $40m, $30m, and $30m, respectively. We can conclude that:

    This industry is Monopolistically Competitive.

    If you sum the squares of the market shares of each firm in an industry (as measured by percent of industry sales), you are calculating the:

    Herfindahl Index.

    Suppose the Herfindahl Indexes for industries A, B, and C are 1,200, 5,000, and 7,500 respectively. These data imply that market power is greatest in:

    Industry C.

    The demand curve of a Monopolistically Competitive producer is:

    More Elastic than that of a Pure Monopolist, but Less Elastic than that of a Pure Competitor.

    What is correct for a Monopolistically Competitive firm in a long-run equilibirum?

    P exceeds Minimum ATC.

    In the long run, economic theory predicts that a Monopolistically Competitive firm will:

    Have excess Production Capacity.

    In long-run equilibrium, both Purely Competitive and Monopolistically Competitive firms will:

    Equate Marginal Cost and Marginal Revenue.

    In long-run equilibrium, Monopolistic Competiton entails:

    An underallocation of resources due to Excess Capacity.

    In which of these continuums of degrees of competition (lowest to highest) is Oligopoly properly placed?

    Pure Monopoly, Oligopoly, Monopolistic Competition, Pure Competition.

    Oligopoly indicates:

    A few firms producing either a differentiated or a homogenous product.

    Oligopoly industries are characterized by:

    A few dominant firms and substantial entry barriers.

    If there are significant economies of scale in an industry, then:

    A firm that is large may be able to produce at a lower unit cost than can a small firm.

    As a general rule, Oligoply exists when the four-firm concentration ratio is:

    40 percent or more.

    Suppose that total sales in an industry in a particular year are $600m and sales by the top four sellers are $200m, $150m, $100m, and $50m, respectively. We can conclude that:

    The concentration ratio is more than 80 percent.

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