Monopolistic Competition

398 Part 5 . PRICES, PROFITS, AND INDUSTRY PERFORMANCEADDITIONAL EXERCISES FOR ASSIGNMENT• Questions• CHECKPOINT 15.1 What Is Monopolistic Competition?1. How would a merger between Pizza Hut and Papa Johns affect the fourfirmconcentration ratio for the home delivery pizza market? How would itaffect the Herfindahl‐Hirschman Index for the home delivery pizza market?• CHECKPOINT 15.2 Output and Price Decisions2. Draw an example of a firm in monopolistic competition that is incurring an economic loss. Besure to label all the curves. Indicate the area that equals the firm’s economic loss.• CHECKPOINT 15.3 Product Development and Marketing3. Explain how selling costs in monopolistic competition affect the efficiency of monopolisticcompetition.• Answers• CHECKPOINT 15.1 What Is Monopolistic Competition?1. Both Pizza Hut and Papa Johns are two of the three largest firms in thehome delivery pizza market. So a merger between Pizza Hut and PapaJohns would raise the four‐firm concentration ratio and raise the Herfindahl‐HirschmanIndex.• CHECKPOINT 15.2 Output and Price Decisions2. Figure 15.5 illustrates a firm in monopolisticcompetition that is incurring an economic loss.The economic loss equals the area of the grayrectangle.