Liberty University ECON 213 InQuizitive chapter 12 complete solutions correct answers updated

Liberty University ECON 213 InQuizitive chapter 12 complete solutions correct answers updated

Chapter 12: Monopolistic Competition and Advertising

In the short run, low barriers to entry and exit allow new entrants into a monopolistically competitive market.

What are the characteristics of monopolistic competition?

Which shift in the demand curve is most likely to describe a company in a monopolistically competitive market that begins to spend more on advertising?

Which of the following are reasons a firm might choose to advertise?

For each industry, drag the label into the column of the table that describes what type of market it is.

What might be the consequences of government intervention in the bottled water industry?

Government regulation of prices in the bottled water industry – benefit consumers because it is a – industry. Although – might increase because of government regulation in the short run, in the long run many companies would –. This would hurt consumers because they would have less convenience and fewer options.

Which graph likely represents a popular designer sunglasses company located in a busy, downtown shopping mall?

How does advertising affect industries in competitive markets? Fill in the blanks to complete the passage.

It is – for individual firms in competitive markets to invest in advertising because they sell –. Advertising in this market increases – without directly influencing sales. However, – will still advertise to increase demand for the common product.

In monopolistically competitive markets, government regulation is always desirable because it improves efficiency.

What does a shift from point 1 to point 3 illustrate about the result of advertising in monopolistically competitive markets?

How does advertising affect consumers? Fill in the blanks to complete the passage.

Advertising creates – demand for a particular product because it builds –. When consumers are unwilling to switch to a substitute product, they face –.

In which market type(s) are individual firms likely to advertise regularly?

When are firms more efficient? Order the following firms from least efficient to most efficient.

Kayla’s cranberry bog produces one product and sells it at market price.

Comcast is the only high-speed Internet provider for a particular urban area.

Javier’s shoe store sells many types of shoes and operates with a lot of excess capacity.

Michael opens a food cart serving a type of food that is only slightly differentiated from his nearby competitors’.

How do the actions of the Federal Trade Commission influence advertising?

A pizza company that charges five dollars more for its pizzas than a competitor’s pizza will find it impossible to survive in a monopolistically competitive market.

Drag the industries to the graph that would best represent them.

Drag the following products to the graph that most likely illustrates their price and output.

Katy owns a monopolistically competitive firm that has many competitors that advertise. What can Katy realistically hope to achieve if she decides to advertise as well?

Match the description of the industry to the type of market in which it belongs.

After seeing the success of Jimena’s chocolate shop, three more stores have opened in one town. Each offers its own distinctive style of chocolate confection.

Crab fishermen in Alaska charge similar prices for their products.

Consumers have only one option where they can get their tap water.

What are some of the differences between a monopolistically competitive firm and a competitive firm?

Monopolistically competitive firms use markup to increase profits, while markup is not possible in competitive industries.

There are strict government regulations on monopolistically competitive industries, while competitive industries are regulation free.

In monopolistically competitive industries, products are more differentiated than in competitive industries.

Firms in competitive industries must sell at market price, while firms in monopolistically competitive industries can charge more.

The barriers to entry are high in competitive industries and very low in monopolistically competitive industries.

There are usually few competitors in a monopolistically competitive industry, while there can be many competitors in a competitive industry.

Ananya is the owner of a toy store and is considering whether or not to purchase advertising for her company. The graph here illustrates the firm’s long-run average total cost curve in three different scenarios. Drag each situation to the appropriate point on the graph.

Order the industries based on increasing market power and ability to set prices, starting with the highest.

Advertising expenses occupy approximately what percentage of global economic activity?

Match each type of market to a possible incentive or disincentive for advertising in it.

Consumer choice is limited because a particular good is unique and has few close substitutes.

Firms in this market sell nearly identical products for nearly identical prices.

Consumers must choose among several distinct variations of the same basic product type.

Mrunal opened the first flower shop in her town. For a while, she was the only provider of flowers, until people noticed how profitable her business had been. Now several new flower shops have opened. What might happen to Mrunal’s business in the long run?

When it is easy for competitors to enter the market, – will increase. In the – run, as more competitors enter the market, it – be possible for existing companies to earn economic profit. This means that the price charged must be equal to –.

Identify each situation as either a competitive market or a monopolistically competitive market.

A manufacturer of copper wire sells its product at a price equal to the marginal cost.

A clothing retailer charges a price $10 higher than its marginal cost to produce the clothing.

A lobster fisherman produces at an output level equal to the efficient scale.

A candy company produces a level of output that is smaller than the level needed to minimize average total cost.

An ice cream parlor that makes its product on the premises operates with excess capacity.

Fill in the blanks to describe the characteristics of monopolistic competition.

Monopolistic competition is a market type characterized by low –, – different firms, and – products. Firms in these kinds of markets possess a small degree of market power, which allows them to set – prices than in competitive markets.

Match the type of product differentiation to the situation it describes.

A gas station right off the highway attracts more customers than a gas station five miles away.

One clothing company releases a new line of cutting-edge fashions every year, while another sticks to popular, classic designs.

One restaurant chain sells $2 burgers, while another sells burgers using fresher ingredients for $7.

One computer company sells desktops, while another sells tablets.

A Mercedes-Benz car dealership sells new cars at a higher price than a Nissan car dealership.

Which of the following is a consequence of product differentiation in monopolistically competitive industries?

Companies that spend less money than their competitors on Super Bowl advertisements are never market leaders in their industries.

Advertising is not equally productive for firms in every market type.

In the short run, low barriers to entry and exit allow new entrants into a monopolistically competitive market.