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Monopolistic Competitive Industry Basic Features

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Question 8
Which of the following is not a basic feature of a monopolistically competitive industry?
a. There are many buyers and sellers in the industry
b. Each firm in the industry produces a differentiated product
c. There is free entry and exit into the industry
d. Each firm owns a patent on its product

Question 9
Bette's Breakfast, a perfectly competitive eatery, sells its "Breakfast Special" (the only item on the menu) for $5.00. The costs of waiters, cooks, power, food etc. average out to $3.95 per meal; the costs of the lease, insurance and other such expenses average out to $1.25 per meal. Bette should

a. close her doors immediately because she losing money.
b. continue producing in the short run, but plan to go out of business in the long run.

c. raise her prices above the perfectly competitive level.
d. lower her output.

Question 10
The prisoner's dilemma refers to games where
a. neither player has a dominant strategy.

b. one player has a dominant strategy and the other does not.

c. both players have a dominant strategy which results in the largest possible payoff.

d. both players have a dominant strategy which results in a lower payoff than their dominated strategies.

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Solution Preview

Question 8
Which of the following is not a basic feature of a monopolistically competitive industry?

d. Each firm owns a patent on its product

Hence here Correct answer is d.
http://www.amosweb.com/cgi-bin/awb_nav.pl?s=wpd&c=dsp&k=monopolistic+competition.

Question 9
Bette's Breakfast, a perfectly competitive eatery, ...

Solution Summary

The expert examines monopolistic competitive industry basic features.

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See Also This Related BrainMass Solution

4 economic questions...

Just answers the 4 questions below using some economic concepts.

#1. Choose a real world industry and determine which of the four market structures (perfect competition, monopolistic competition, oligopoly, or monopoly) this industry is most closely related to. Be sure to support your answer by referring to the characteristics that define each market structure. Please do not use the example for the questions below, use something else.

#2. Please give comment and what you think??? An example of the 'Monopolistic Competition' market structure would be the cosmetics industry.

With cosmetics, there are many different sellers and buyers for this market. Some of the names in this industry are: MAC, Chanel, Revlon, Loreal, Estee Lauder (just to name a few).

Although the makeup products made by these companies include basic features you would find in other products within the same category, each one that is created is slightly different from the competitor with some features more enhanced than others. Maybe one lipstick has SPF protection, while the other is designed to be water-proof, etc.

In addition, in this industry, there is also easy entry and exit. There are many cosmetics entities from sole proprietors who make their own cosmetics, to independent shops in the mall, to big companies that you find in drugstores, to other large companies found only in department stores.

#3. Please give comment and what you think??? I believe that the convenience store set is an oligopoly. Specifically, I'm thinking of 7-11. I thought, at first that they had a monopoly, but there are others, like that little "Marts" at the gas stations. Entry is difficult since there is a high price to franchise and space is limited, so profits could be hard to come by. These "marts" offer as much as they can in a very small store. Their product is differentiated in this way. Whoever offers the most choices, wins. There are only a few sellers and many buyers. We all know that their prices are outrageous, and since they are "convenient", we pay their prices.

#4. Please give comment and what you think??? An example of Monopolistic Competition market structure would be the toothpaste industry. With many different brands of toothpastes in the market there are many buyers that have their own need of what kind of toothpaste they want. Some of them would be Colgate, Crest, Aquafresh, Rembrandt,etc. You find different things in each toothpaste for example, for sensitive teeth, whitening, tarter control, plaque control; some have more features then one but they are all different. This is not an entry and exit because I have not known of an independent person making toothpaste. I think all toothpastes are from big companies.

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