When Frank Perdue began marketing chicken under his name, the market for chicken was perfectly competitive.
Questions:
How did Perdue create a brand name for chicken? What did he gain by doing so?
What did society potentially gain from having brand-name chicken? What did it potentially lose? Why?
Production differentiation can lead to false advertising. Does the existence of product differentiation imply that the government should intervene in these markets?
Briefly explain your answer:
1. A monopolistically competitive industry is characterized by few sellers in a highly competitive market.
2. In monopolistically competitive industry firms monopoly power comes from producing an identical product
3. It is relatively easy for new firms to enter a monopolistically competitive industry.
4. A monopolistically competitive firm faces a horizontal demand curve because of relatively large number of sellers in the market.
5. When a monopolistically competitive firm is in a long-run equilibrium, average total cost is at minimum.
6. A profit maximizing, monopolistically competitive firm will produce the quantity of output at which price equals to marginal cost.
7. The only way for a monopolistic competitor to increase its sales is to lower its price.
8. Monopolistically competitive firms earn their economic profits with barriers to entry
9. Monopolistically competitive firms are efficient because in the long run price falls to equal marginal cost.
10. In a long-run monopolistic competitor can earn positive economic profit
11. In the long-run equilibrium monopolistic competitor exhibits allocative and productive
efficiency.
12. Monopolistically competitive firms engage in price competition
13. Monopolistically competitive firm does not engage in advertising because product under
this market structure is an identical.
14. The goal of product differentiation is to postpone the condition of the zero economic profit
15. The benefit of monopolistically competitive market is variety of product, the cost is an
increase in market efficiency.
