1. The trade-off with entry is that an increase in the number of firms leads to higher
but greater .
2. When products are differentiated by location, the entry of firms generates benefits for consumers in the form of
.
3.A perfectly competitive firm has a demand curve, whereas a monopolistic competitive firm has a
demand curve.
4. In the long-run equilibrium in a perfectly competitive market, price is equal to both
and
.
5. Arrows up or down: As product differentiation diminishes, the price elasticity of demand for the product of a monopolistically competitive firm
and the average cost of production
.
6. The phenomenon of “happy hour” pricing ( prices when demand is relatively high) results from relatively
(elastic/inelastic) demand. (Related to Application 3 on page 592.)
7. Advertising for eyeglasses (increases/ decreases) the price of eyeglasses because advertising promotes
.
8.An advertisement that succeeds in getting consumers to try the product will be sensible only if the number of
customers is large.
9. In Table 26.1 on page 594, the profit from repeat customers will equal the cost of the advertisement if there are
repeat customers.