Essay on Study Guide for Economics - 7364 Words

B. Answers to Short-Answer, Essays, and Problems 1. What are the major features of monopolistic competition compared to pure competition and pure monopoly? In monopolistic competition, there are a relatively large number of firms, not the thousands of firms as in pure competition. The monopolistically competitive firms produce differentiated products, not the standardized products of pure competition. Product differentiation means that monopolistic competitors engage in some price competition because they have some limited â€Å"price making† ability based on the less elastic demand for their particular product. This demand, however, is more elastic than the demand for monopolists’ products. Monopolistic competitors, unlike most†¦show more content†¦[text: E p. 488; MI p. 230] 6. Assume that the short run cost and demand data given in the table below confront a monopolistic competitor selling a given product and engaged in a given amount of product promotion. Compute the marginal cost and marginal revenue of each unit of output and enter these figures in the table. Total Marginal Quantity Marginal Output cost cost demanded Price revenue 0 $ 25 0 $60 1 40 $15 1 55 $ 55 2 45 5 2 50 45 3 55 10 3 45 35 4 70 15 4 40 25 5 90 20 5 35 15 6 115 25 6 30 5 7 145 30 7 25 –5 8 180 35 8 20 –15 9 220 40 9 15 –25 10 265 45 10 10 –35 (a) The firm will produce 4 units of output. At that level, marginal revenue ($25) is greater than marginal cost ($15), but as close to equality as possible. Total profit will be $90 ($160 – $70). (b) The demand for the firm’s product will decrease until price equals average cost and total profits are zero. [text: E pp. 488-490; MI pp. 230-232] 7. Assume that the short-run cost and demand data given in the table below confront a monopolistic competitor selling a given product and engaged in a given amount of product promotion. Compute the marginal cost and marginal revenue of each unit of output and enter these figures in the table. Total Marginal Quantity Marginal Output cost cost demanded Price revenue 0 $ 75 0 $180 1 120 $ 45 1 165 $ 165 2 135 15 2Show MoreRelatedManagerial Economics: A Study Guide2627 Words   |  11 Pagesï » ¿Running Head: Managerial Economics Managerial Economics Executive Summary A managers decision to start a new business in an international market essentially requires a careful analysis of the industry patterns, economic situation, and consumer behavior. The question is whether a new business should be started in an international setting or not. The answer to this question has been given in the light of ten important factors and costs which impact this managerial decision for a new businessRead MoreEconomics 130: Exam 3 Study Guide3071 Words   |  13 Pagesï » ¿Economics 130: Exam 3 Study Guide 1) Which market model has the least number of firms? a. 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