A monopolistically competitive industry is characterized by concentration ratios and entry barriers

What characterizes monopolistic competition?

Many firms produce a particular type of product, but each maintains some independent control over its own price.

Monopolistically competitive industries are characterized by all of the following except

Homogenous products.

In monopolistic competition, a firm

Has a downward-sloping demand curve

Which of the following industries is not an example of monopolistic competition?

Airlines

If there are many firms in an industry producing goods that are similar but slightly different, this is an
example of

Monopolistic competition

Which of the following is not characteristic of monopolistic competition?

Firms have zero control over price.

A concentration ratio measures the

Proportion of industry output produced by the largest firms

The combined market share of the top four firms in a monopolistically competitive industry will
typically be in the range of

20 to 40 percent.

A monopolistically competitive industry is characterized by ________ concentration ratios and
________ entry barriers.

low; low

A major difference between oligopoly and monopolistic competition is that monopolistically
competitive firms and oligopolies do not

Have many competitors.

Each producer in monopolistic competition has

Some market power.

The demand curve faced by a monopolistically competitive firm is

Downward-sloping.

Which of the following is similar for oligopoly and monopolistic competition?

Both have market power. -An oligopoly is characterized by high concentration ratios, market power, and interdependence, whereas monopolistic competition is characterized by a high degree of brand loyalty, low concentration ratios, some market power, and independent product decisions.

One of the main differences between an oligopoly and a monopolistically competitive firm is that a
monopolistically competitive firm

Is relatively independent; an oligopoly is interdependent

If a monopolistically competitive firm raises its price, it will

Lose some of its customers, but nowhere close to all its customers.

The kinked oligopoly demand curve does not describe the demand curve for monopolistic competition
because in monopolistically competitive markets,

Firms are not as interdependent as oligopolistic firms.

A major difference between monopoly and monopolistic competition is

The number of firms in the market.

Entry into a market characterized by monopolistic competition is generally

Very easy because few barriers exist.

Monopolistically competitive firms have a "monopoly" element to them because

Brand loyalty gives them a captive audience.

The competitive dimension of monopolistic competition is that

Low barriers to entry tend to push economic profits toward zero

Which of the following most characterizes monopolistic competition?

Product differentiation.

Product differentiation refers to

Features that make one product appear different from competing products in the same market.

Product differentiation occurs when

Buyers perceive differences in the products of several companies.

Which of the following is an example of product differentiation?

Two shampoos differ only in their labels, but consumers pay $0.20 more for the label they recognize.

Large cities typically have many drugstores that offer different levels of service and product selection.
The drugstore market in big cities can best be classified as

Monopolistic competition.

The main difference between perfect competition and monopolistic competition is

The degree of product differentiation

A monopolistically competitive firm can raise its price somewhat without fear of great change in unit
sales because

Of product differentiation and brand loyalty.

A monopolistically competitive firm can raise its price somewhat without fear of great change in unit
sales because of

Brand loyalty

Brand loyalty usually makes the demand curve for a product

Less price-elastic

The cross-price elasticity of demand for the products of monopolistically competitive firms is

Low

Cross price elasticity measures

The change in quantity demanded for one good due to a change in the price of another good.

Brand loyalty

Exists even when products are virtually identical

When a monopolistically competitive firm advertises, it is attempting to increase

The demand and decrease the price elasticity of demand for its product

Firms in a monopolistically competitive market will

Use the profit-maximizing rule MC = MR.

A monopolistically competitive firm maximizes profits or minimizes losses in the short run by

Producing at the output level where MR equals MC.

If a monopolistic competitor is maximizing profit, it is producing at a point where marginal cost

Is less than price.

In order to maximize profit, Will’s Beach Ball Company should produce _______
and charge a price of _______ each.

7 beach balls; $10

At the profit-maximizing output and price, Will’s Beach Ball Company will earn
a profit equal to

$18

At the profit-maximizing output and price, Will’s Beach Ball Company will earn
a ________ economic profit, and ________ the market will occur.

positive; entry into

To maximize profit, Sylvie’s Shampoo Company. should produce _______
bottles of shampoo and charge a price of _______ each.

7; $20

At the profit-maximizing output and price, Sylvie’s Shampoo Company. will earn
a profit equal to

$36.

At the profit-maximizing output and price, Sylvie’s Shampoo Company. will earn
a ________ economic profit, and ________ the market will occur.

positive; entry into

Entry into a market characterized by monopolistic competition

Is frequent because barriers to entry are low

In monopolistic competition, a firm’s demand curve is tangent to the ATC curve in the long run
because

Entry eliminates economic profit, and exit eliminates losses.