24.Consider the case of two restaurants in a community. One is a McDonald's and theother is a Burger King. Also consider the case of a wheat farmer in Nebraska and a wheatfarmer in Oklahoma. The restaurants can be considered to be in a monopolisticallycompetitive industry and the wheat farmers in a perfectly competitive industry. Both industriessupply food. Why is there a difference?a.Restaurants are a market with a differentiated product, and agriculture is considered ina market with homogenous products.b.Restaurants are in a market with high barriers to entry, and agriculture is in a marketwith low barriers to entry.Both markets are considered industries with asymmetric knowledge (lack of perfectc.knowledge) of market conditions. In monopolistic competition it is the buyer who has the lackof perfect knowledge, and in perfect competition it is the seller who has the lack of perfectknowledge.d.All of the above

A perfect competition where there are a large number of sellers selling the same product; A…

Answered: 24. Consider the case of two…

Principles of Microeconomics (MindTap Course List)

8th Edition

ISBN:9781305971493

Author:N. Gregory Mankiw

Publisher:N. Gregory Mankiw

Chapter16: Monopolistic Competition

Section: Chapter Questions

Problem 8PA

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8. From the following graph, show the equilibriums under each scenario. Market is in equilibrium at A under competitive market. (a) Show the equilibrium under monopoly. Call this point B (b) When the demand increased in the area due to immigration, show the new competitive equilibrium, call this point C. (c) Show the new monopolistic equilibrium with increased demand and call this point D. P'. P MR D. MR, Q. Q', Quantity Price
In which of the following situations would Maria's Doughnut Shop have the MOST market power? Select one: a. The closest doughnut shop or bakery is 25 miles away from Maria's shop. b. There are two rival doughnut shops within three miles but no other bakeries. c. The closest doughnut shop is 10 miles away, but there is a bakery with breakfast pastries two miles away. d. Within three miles, there are five other doughnut shops and three bakeries that sell breakfast pastries.
1. If the demand for a good increases at the same time as the supply of the same good decreases, what will happen to the equilibrium price and quantity of the good? Explain. 2. What is the deadweight loss of monopoly? Show the deadweight loss when the monopolist can perfectly price discriminate. 3. What is the point of long run equilibrium of a monopolistically competitive firm. How does it compare to a competitive firm.
a. b. C. d. Price panel a panel b panel c panel di Price (a) (c) MA MC MR ATC Quantity MC ATC D Quantity Price Price (b) MR (d) MC Quantity MC مما ATC Refer to Figure 3. Assume a monopolistic competitive environment: From the 4 graphs depicted, which one of them represents a short-run equilibrium that encourages the entry of other firms? ATC Quantity D
1. Two firms produce identical products at zero cost, and they compete by setting prices. If each firm charges a low price, the both firms earn profits of zero. If each firm charges a high price, then each firm earns profits of $30. if one firm charges a high price and the other firm charges a low price, the firm that charges the lowest price earns profits of $50 and the firm charging the highest price earns profits of zero. a. Write this game in normal form. b. Suppose the game is infinitely repeated. Can the players sustain the "collusive outcome" as a Nash equilibrium if the interest rate if 50 percent?
3. Discuss the long debate of economists whether there is a significant loss of well-being to society in markets that are monopolistically competitive rather than perfectly competitive
1. Under the model of monopolistic competition, a(an) ________ in the number of firms in the industry will cause ________ to ________. 2. In the model of monopolistic competition, if the price is ______ than average costs, then firms are earning __________ economic profit and we should expect firms to _________ the industry. 3. In the model of monopolistic competition, if an industry has large ________ relative to another industry, then we should expect _________ firms to operate in a long-run equilibrium of that industry.
44. Which of the following does a monopolistic competitive firm engage in to try and increase profits: Select one: of O a. Non-pricing competition b. Shadow markets C. Price fixing O d. Collusion 16. A consequence of a Maximum price is: Select one: of a. A new equilibrium established b. Excess supply c. Over production of goods d. Excess demand
1. If Sam and Jack each produce the same quantity of appointments as would be produced in perfect competition, the total quantity of appointments is ___ the price per lesson would be ____ , and the economic profit of Sam and Jack would be____? 2. If Sam and Jack form a cartel and produce the same quantity of appointments as would be produced in a monopoly, the total quantity of appointments would be ____, the price per appointment is ____ and the economic profit of Sam and Jack is ____? 3. Would Sam and Jack have an incentive to break the cartel agreement and lower their price to increase the number of tennis lesson appointments?
Why does a local McDonald's face a downward-sloping demand curve for its Quarter Pounder? In monopolistically competitive markets, A. changing the price affects the quantity sold because there are substantial barriers to entry . B. changing the price does not affect the quantity sold because firms have market power . C. changing the price affects the quantity sold because firms are price takers. D. changing the price affects the quantity sold because firms sell differentiated products. E. changing the price does not affect the quantity sold because firms are price makers
1. How might advertising make market less competitive? How might it make markets more competitive? Give the arguments for and against brand names. 2. You 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? a. P < MC, P > ATC b. P > MC, P < ATC c. P = MC, P > ATC d. P > MC, P = ATC
2. "The competition commission investigated the high data prices in South Africa in 2017. The report, which was presented two years later, found that the data services market is "highly concentrated" with a duopoly of the leading cell phone operators - MTN and Vodacom".Based on the paragraph given above, which of the statements is CORRECT?A. Highly concentrated market benefits consumers as they have many, many choices available to them.B. Highly concentrated market restricts consumer welfareC. Highly concentrated market is an excellent reason for government to reduce regulationD. Highly concentrated market increases consumer welfare

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