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CHAPTER 25
Monopolistic Competition and Oligopoly

A. Short-Answer, Essays, and Problems

1. What are the major features of monopolistic competition compared to pure competition and pure monopoly?

2. “Pure competition or pure monopoly industries will tend to be one-price industries. Monopolistic competition, however, is a multiprice industry.” Explain.

3. How does economic rivalry take place in monopolistic competition? Describe the different aspects of product differentiation and price competition.

4. What are types of firms that exemplify monopolistic competition?

5. How are monopolistically competitive industries identified with concentration ratios?

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 $_____ 1 55 $_____ 2 45 _____ 2 50 _____ 3 55 _____ 3 45 _____ 4 70 _____ 4 40 _____ 5 90 _____ 5 35 _____ 6 115 _____ 6 30 _____ 7 145 _____ 7 25 _____ 8 180 _____ 8 20 _____ 9 220 _____ 9 15 _____ 10 265 _____ 10 10 _____

(a) At what output level and at what price will the firm produce in the short run? What will be the total profit? (b) What will happen to demand, price, and profit in the long run?

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.

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