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.38395469_14_Ch14_p365-386.qxd 29/12/06 12:48 PM Page 3845.Claire is considering buying the only Hungarian restaurant in Boise, Idaho.The restaurant s unique food means thatit faces a negatively sloped demand curve and is currently earning an economic profit.Why shouldn t Claire assumethat the current profits will continue when she makes her decision?a.Claire will not earn those profits right away because she doesn t know much about cooking.b.The firm is a monopolist, which attracts government regulation.c.Current economic profits will be eliminated by the entry of competitors.d.While economic profits are positive, accounting profits may be negative.Use the accompanying diagram to answer questions 6 7.ATCAVCD0D3 D1D2q3 q2 q1 q0Quantity6.Which of the demand curves represents a long-run equilibrium for the firm?a.D0b.D1c.D2d.D37.Which of the demand curves will result in the firm shutting down in the short run?a.D0b.D1c.D2d.D38.In the long run, firms in monopolistic competition do not attain productive efficiency because they producea.at a point where economic profits are positive.b.at a point where marginal revenue is less than marginal cost.c.at a point to the left of the low point of their long-run average total cost curve.d.where marginal cost is equal to long-run average total cost.9.In the long run, firms in monopolistic competition do not attain allocative efficiency because theya.operate where price equals marginal cost.b.do not operate where price equals marginal cost.c.produce more output than society wants.d.charge prices that are less than production costs.10.Compared to perfect competition, firms in monopolist competition in the long run producea.less output at a lower cost.b.less output at a higher cost.c.more output at a lower cost.d.more output at a higher cost.384Price95469_14_Ch14_p365-386.qxd 29/12/06 12:49 PM Page 38511.If Rolf wants to use advertising to reduce the elasticity of demand for his chiropractic services, he must makesure the advertisinga.clearly states the prices he charges.b.shows that he is producing a product like that of the other chiropractors in town.c.shows why his services are truly different from the other chiropractors in town.d.explains the hours and days that he is open for business.12.Advertising about prices by firms in an industry will make an industry more competitive because ita.reduces the cost of finding a substitute when one producer raises his price.b.assures the consumers that prices are the same everywhere.c.increases the cost for all firms because of the existence of economies of scale.d.reduces the number of firms because of the existence of economies of scale.Problems1.Which of the following markets are perfectly competitive or monopolistically competitive.Why?a.soy marketb.retail clothing storesc.Spago s Restaurant Beverly Hills2.List three ways in which a grocery store might differentiate itself from its competitors.3.What might make you choose one gas station over another?4.If Frank s hot dog stand was profitable when he first opened, why should he expect those profits to fallover time?5.Can you explain why some restaurants are highly profitable while other restaurants in the same general areaare going out of business?6.Suppose that half the restaurants in a city are closed so that the remaining eateries can operate at full capacity.What  cost might restaurant patrons incur as a result?7.Why is advertising more important for the success of chains such as Toys  R Us and Office Depot than for thecorner barbershop?8.What is meant by the price of variety? Graph and explain.9.Think of your favorite ads on television.Do you think that these ads have an effect on your spending? Theseads are expensive; do you think they are a waste from society s standpoint?10.How does Starbucks differentiate its product? Why does Starbucks stay open until late at night but a donut orbagel shop might close at noon?11.Product differentiation is a hallmark of monopolistic competition, and the text lists four sources of suchdifferentiation: physical differences, prestige, location, and service.How do firms in the industries listed heredifferentiate their products? How important is each of the four sources of differentiation in each case? Give themost important source of differentiation in each case.a.fast-food restaurantsb.espresso shops/cartsc.hair stylistsd.soft drinkse.wine12.How are monopolistically competitive firms and perfectly competitive firms similar? Why don t monopolisti-cally competitive firms produce the same output in the long run as perfectly competitive firms, which facesimilar costs?38595469_14_Ch14_p365-386.qxd 29/12/06 12:49 PM Page 38613.As you know, perfect competition and monopolistic competition differ in important ways.Show your understandingof these differences by listing the following terms under either  perfect competition or  monopolistic competition.Perfect Competition Monopolistic Competitionstandardized product productive efficiencydifferentiated product horizontal demand curveallocative efficiency downward-slopingdemand curveexcess capacity no control over price14.In what way is the use of advertising another example of Adam Smith s  Invisible Hand, according to which entre-preneurs pursuing their own best interest make consumers better off?386 [ Pobierz całość w formacie PDF ]