PLEASE ANSWER ALL THE QUESTIONS PLEASE 1) If supermarkets compete in a monopolis
ID: 1225488 • Letter: P
Question
PLEASE ANSWER ALL THE QUESTIONS PLEASE
1) If supermarkets compete in a monopolistically competitive industry and in a given local market there are three stores, all of which are losing money, the most likely outcome is:
A price war will ensue leading to the bankruptcy of all three firms.
One firm will survive and become a monopoly.
One or more of the existing stores will exit and the remaining competitor(s) will then be able to earn normal profits.
Consumer demand will increase to the point where all the supermarkets can earn normal profits.
One of the supermarkets will innovate and gain control over the market.
2) Which of the following statements is TRUE?
In a monopolistically competitive industry firms are able to set their prices either much higher or lower than that of their competitors' prices.
In monopolistically competitive industries barriers to entry reduce the number of competitors.
In a monopolistically competitive industry firms cannot earn excess profits in the long run.
In a monopolistically competitive industry prices are set by markets.
In a monopolistically competitive industry each seller produces an identical product.
3) In a monopolistically competitive market, if one firm innovates and finds a profitable location in product space, then:
Its competitors will eventually compete away their excess profits by taking away customers through creating their own version of the product.
The innovating firm will erect entry barriers and may even become a monopolist.
The innovating firm will likely go out of business as their competitors create a similar versions of the product but at a lower price.
Only a few competitors will be able to compete with the innovating firm creating an oligopoly.
The product will become homogeneous and the industry will become perfectly competitive.
4)In the graph above, which statement is TRUE?
The typical gas station's economic profits are greater than zero with a price of $4.00 per gallon producing 2,000 gallons of gas.
The typical gas station's economic profits are greater than zero, earning 10 cents of excess profits per gallon.
The typical gas station's economic profits are less than zero, with a price of $3.90 and losing 10 cents per gallon.
The typical gas station's economic profits are less than zero, with a price of $3.80 and losing 15 cents per gallon.
The typical gas station's economic profits are less than zero, with a price of $3.90 and producing 3,000 gallons of gas.
5) Which of the following is NOT a characteristic of a monopolistically competitive market?
There are no barriers to entry.
There are many sellers.
There is perfect information.
All firms charge the same price.
Each firm's product is slightly different from that of their competitor's product.
6) In a monopolistically competitive industry, if the typical producer's price is below their average total costs, then:
Economic profits are less than zero and exit will occur until price rises to point where firms are able to earn normal profits.
Economic profits are greater than zero and entry will occur until price falls to average total costs.
Economic profits are less than zero and exit from the industry will occur until price rises to equal average variable costs.
Economic profits are greater than zero and entry will occur until price rises to average total costs.
Economic profits are less than zero and entry into the industry will occur until price rises to equal average total costs.
7) An important difference between perfectly competitive markets and monopolistically competitive markets is:
In monopolistically competitive markets firms tend to be very large and in many cases can control the markets in which they operate.
In monopolistically competitive markets there are significant barriers to entry that prevent competitors from competing profits down to the normal level over the long run.
In perfectly competitive markets each firm sets their own price and in monopolistically competitive markets the market sets the price.
In monopolistically competitive markets the product is heterogeneous and in competitive markets the product is homogeneous.
In perfectly competitive markets firms engage in product differentiation to try to earn temporary excess profits.
8) In a monopolistically competitive industry, if price is above average total cost then:
Economic profits are greater than zero and barriers to entry will prevent potential competitors from competing profits down to the normal level.
Economic profits are less than zero and exit from the industry will occur until price rises to equal average total costs.
Economic profits are greater than zero and entry will occur until price falls to average total costs.
Economic profits are less than zero and exit from the industry will occur until price rises to equal average variable costs.
Economic profits are greater than zero and entry will occur until price falls to average variable costs.
9)Which of the following is NOT an assumption of a monopolistically competitive market?
Each seller produces a heterogeneous product.
There are significant barriers to entry.
There are many sellers in the market.
The seller's product is a close substitute to their competitors' products.
There is perfect information.
A price war will ensue leading to the bankruptcy of all three firms.
One firm will survive and become a monopoly.
One or more of the existing stores will exit and the remaining competitor(s) will then be able to earn normal profits.
Consumer demand will increase to the point where all the supermarkets can earn normal profits.
One of the supermarkets will innovate and gain control over the market.
Price Per 54.00 $3.90 Gallon MC ATC S3.70 Demand S3.50 MR 1,000 2,000 3,000 4,000 Quantity in Gallons of Gas Typical Gas Station in a Monopolistically Competitive IndustryExplanation / Answer
2.In a monopolistically competitive industry firms cannot earn excess profits in the long run.
Explanation-For monopoly in short run,there is super normal profit.Getting attracted by supernormal profits new firms will enter in longrun.Long run equilibrium occurs where only normal profits are being made as new firms will keep entering as long as there are supernormal profits to be made.
3.The innovating firm will erect entry barriers and may even become a monopolist.
4. The typical gas station's economic profits are less than zero, with a price of $3.80 and losing 15 cents per gallon.
5.There is perfect information.
Explanation-
6.Economic profits are less than zero and exit will occur until price rises to point where firms are able to earn normal profits.
7)
In monopolistically competitive markets the product is heterogeneous and in competitive markets the product is homogeneous.
8) Economic profits are greater than zero and entry will occur until price falls to average total costs.
9)There is perfect information.
In monopolistically competitive markets the product is heterogeneous and in competitive markets the product is homogeneous.
8) Economic profits are greater than zero and entry will occur until price falls to average total costs.
9)There is perfect information.
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