Michael Parkin
ISBN #9780133872279
12th Edition
839 Questions
Homework Questions
Monopolistic competition is a widely encountered market structure where many firms offer differentiated products and compete on quality, price, and marketing. Firms choose output by equating marginal revenue and marginal cost, but due to product differentiation, they operate with downward-sloping demand curves that lead to markups over marginal cost and, in the long run, zero economic profit. While product variety enhances consumer choice, it often comes with inefficiencies including excess capacity. Marketing and product development are critical for maintaining a competitive edge, yet they serve to both increase costs and modify demand dynamics.
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Which of the following items are sold by firms in monopolistic competition? Explain your selections. Cable television service Wheat Athletic shoes Soda Toothbrushes Ready-mix concrete
The four-firm concentration ratio for audio equipment makers is 30 and for electric lamp makers it is $89 .$ The HHI for audio equipment makers is 415 and for electric lamp makers it is $2,850 .$ Which of these markets is an example of monopolistic competition?
Sara is a dot.com entrepreneur who has established a Web site at which people can design and buy sweatshirts. Sara pays $\$ 1,000$ a week for her Web server and Internet connection. The sweatshirts that her customers design are made to order by another firm, and Sara pays this firm $\$ 20$ a sweatshirt. Sara has no other costs. The table sets out the demand schedule for Sara's sweatshirts. $$\begin{array}{cc} \begin{array}{c} \text { Price } \\ \text { [dollars per sweatshirt/ } \end{array} & \begin{array}{c} \text { Quantity demanded } \\ \text { (sweatshirts per week) } \end{array} \\ \hline 0 & 100 \\ 20 & 80 \\ 40 & 60 \\ 60 & 40 \\ 80 & 20 \\ 100 & 0 \end{array}$$ Calculate Sara's profit-maximizing output, price, and economic profit.
Sara is a dot.com entrepreneur who has established a Web site at which people can design and buy sweatshirts. Sara pays $\$ 1,000$ a week for her Web server and Internet connection. The sweatshirts that her customers design are made to order by another firm, and Sara pays this firm $\$ 20$ a sweatshirt. Sara has no other costs. The table sets out the demand schedule for Sara's sweatshirts. $$\begin{array}{cc} \begin{array}{c} \text { Price } \\ \text { [dollars per sweatshirt/ } \end{array} & \begin{array}{c} \text { Quantity demanded } \\ \text { (sweatshirts per week) } \end{array} \\ \hline 0 & 100 \\ 20 & 80 \\ 40 & 60 \\ 60 & 40 \\ 80 & 20 \\ 100 & 0 \end{array}$$ a. Do you expect other firms to enter the Web sweatshirt business and compete with Sara? b. What happens to the demand for Sara's sweatshirts in the long run? What happens to Sara's economic profit in the long run?
Which shows the situation facing Flight Inc., a producer of running shoes. What quantity does Flight produce, what price does it charge, and what is its economic profit?