Question

36. Criticisms of monopolistic competitive firm behavior include all of these are criticisms of monopolistic competition...

36. Criticisms of monopolistic competitive firm behavior include

all of these are criticisms of monopolistic competition

advertising increases LRATC

resources used in advertising and packaging are wasted and should be used in producing functional goods

advetising raises prices for consumers

37. All of the following are characteristic of the advantages (to the firm) of

advertising except advertising changes the shape of the demand curve toward a more inelastic configuration

advertising changes the shape of the demand curve toward a more elastic configuration

advertising provides important information to customers and potential customers

advertising shifts the demand curve for their product to the right

38. Monopolistic competitive firms can differentiate their product or service by

type

style

perception and image

quality

all of these can differentiate the product

location

39. Monopolistic competitive firms gain market power (power over price) because

their products and services are differentiated

they have strong barriers to entry

there are few sellers in the industry

they offer non-differentiated products and services

40. Regulation of monopolistic competition toward more efficient production conditions might have the negative unintended consequent of

lowering the price in the market

none of these would be negative social consequences from improving efficiency conditions in monopolistic competition

increaseing quantity available in the market

limiting the product variety in the market thus limiting consumers ability to express their individuality

Homework Answers

Answer #1

36) all of these are criticisms of monopolistic competition. While when there are no economies of scale, LRATC is likely to be higher due to high fixed cost, consumers bear the brunt of high prices. Advertising uses too many resources that the firm can use in lowering its ATC otherwise

37) advertising changes the shape of the demand curve toward a more elastic configuration. Because advertising increases consumer's willingness to pay, it makes demand inelastic

38) all of these can differentiate the product. Product differentiation takes any form, be it a change in selling style, packaging or designing, etc

39) their products and services are differentiated

40) limiting the product variety in the market thus limiting consumers ability to express their individuality

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