Question 1

In the long run, firms in monopolistic competition produce at a level that is ________ the efficient scale of output.

Accepted Answer

A)  less than 
B)  equal to 
C)  more than 
D)  All of the above are possible depending on market conditions. 
A)  less than 
B)  equal to 
C)  more than 
D)  All of the above are possible depending on market conditions. A

Question 2

-The above figure shows the demand and cost curves for a firm in ________ in the ________.

Accepted Answer

A)  perfect competition; short run 
B)  monopolistic competition; long run 
C)  perfect competition; long run 
D)  monopolistic competition; short run 
A)  perfect competition; short run 
B)  monopolistic competition; long run 
C)  perfect competition; long run 
D)  monopolistic competition; short run D

Question 3

A product that is a close substitute but not a perfect substitute for the products of the other firms is called

Accepted Answer

A)  a homogeneous product. 
B)  an efficient product. 
C)  a differentiated product. 
D)  an inelastic product. 
A)  a homogeneous product. 
B)  an efficient product. 
C)  a differentiated product. 
D)  an inelastic product. C

Question 4

In the short run, a firm in a monopolistic competition will produce the amount of output where its

Accepted Answer

A)  marginal revenue equals marginal cost and will set its price according to the demand for that output level. 
B)  marginal revenue equals marginal cost and takes the market price as given. 
C)  average revenue equals average cost and will set its price according to the demand for that output level. 
D)  average revenue equals its average cost and takes the market price as given. 
A)  marginal revenue equals marginal cost and will set its price according to the demand for that output level. 
B)  marginal revenue equals marginal cost and takes the market price as given. 
C)  average revenue equals average cost and will set its price according to the demand for that output level. 
D)  average revenue equals its average cost and takes the market price as given.

Question 5

When comparing perfect competition and monopolistic competition, we find that

Accepted Answer

A)  firms in monopolistic competition produce identical products just as do firms in perfect competition. 
B)  firms in monopolistic competition face barriers to entry, unlike firms in perfect competition. 
C)  advertising plays a large role in monopolistic competition, unlike in perfect competition. 
D)  firms in monopolistic competition are price takers just as is the case for firms in perfect competition. 
A)  firms in monopolistic competition produce identical products just as do firms in perfect competition. 
B)  firms in monopolistic competition face barriers to entry, unlike firms in perfect competition. 
C)  advertising plays a large role in monopolistic competition, unlike in perfect competition. 
D)  firms in monopolistic competition are price takers just as is the case for firms in perfect competition.

Question 6

In monopolistic competition, there are

Accepted Answer

A)  many firms making a differentiated product. 
B)  a few firms making a differentiated product. 
C)  many firms making an identical product. 
D)  a few firms making an identical product. 
A)  many firms making a differentiated product. 
B)  a few firms making a differentiated product. 
C)  many firms making an identical product. 
D)  a few firms making an identical product.

Question 7

The Karaoke Channel Online streams professional-grade karaoke for $9.95 a month. Suppose Karaoke Channel Online has a constant marginal cost of $1 per customer and total fixed cost is $20,000. The profit maximizing number of customers is 10,000. Several competitors start to advertise online. Karaoke Channel Online now spends $5,000 a month on advertising and the profit maximizing number of customers increases to 12,000. What is Karaoke Channel Online's average total cost after the advertising begins?

Accepted Answer

A)  $3.08 
B)  $3 
C)  $2.08 
D)  $2.50 
A)  $3.08 
B)  $3 
C)  $2.08 
D)  $2.50

Question 8

A textbook publisher is in monopolistic competition. The firm can sell no books at $100 a book, but for each $10 cut in price, the quantity of books it can sell increases by 20 books a day. The firm's average variable cost and marginal cost is a constant $20 per book. What is the firm's markup?

Accepted Answer

A)  zero 
B)  $20 
C)  $40 
D)  $60 
A)  zero 
B)  $20 
C)  $40 
D)  $60

Question 9

In the long run, all firms in a monopolistically competitive industry make

Accepted Answer

A)  negative accounting profit. 
B)  zero accounting profit. 
C)  an economic profit. 
D)  zero economic profit. 
A)  negative accounting profit. 
B)  zero accounting profit. 
C)  an economic profit. 
D)  zero economic profit.

Question 10

-The figure above shows the cost, marginal revenue, and demand curves of Golden Chow, a producer of dog food. The market for dog food is monopolistic competition. In the short run, Golden Chow sells 400 cans of dog food per day and makes ________. Other firms have ________ incentive to enter the industry.

Accepted Answer

A)  an economic profit of $200 a day; an 
B)  an economic profit of $400 a day; an 
C)  a normal profit of $200 a day; no 
D)  an economic profit of $400 a day; no 
A)  an economic profit of $200 a day; an 
B)  an economic profit of $400 a day; an 
C)  a normal profit of $200 a day; no 
D)  an economic profit of $400 a day; no

Question 11

The best example of a good sold in a monopolistically competitive market is

Accepted Answer

A)  pizza. 
B)  the local newspaper. 
C)  sewer services. 
D)  peaches. 
A)  pizza. 
B)  the local newspaper. 
C)  sewer services. 
D)  peaches.

Question 12

Monopolistic competition differs from monopoly because in monopolistic competition,

Accepted Answer

A)  firms maximize profits. 
B)  firms set marginal revenue equal to marginal cost to maximize profit. 
C)  firms are free to enter and exit. 
D)  All of the above are differences between monopoly and monopolistically competitive firms. 
A)  firms maximize profits. 
B)  firms set marginal revenue equal to marginal cost to maximize profit. 
C)  firms are free to enter and exit. 
D)  All of the above are differences between monopoly and monopolistically competitive firms.

Question 13

The figure shows the demand curve for Gap jackets (D), and Gap's marginal revenue curve (MR), marginal cost curve (MC), and average total cost curve (ATC).
-In the figure above, if the market for jackets were perfectly competitive, in long-run equilibrium, each firm would sell ________ jackets per day at ________ per jacket.

Accepted Answer

A)  132; $122 
B)  100; $130 
C)  100; $80 
D)  128; $114 
A)  132; $122 
B)  100; $130 
C)  100; $80 
D)  128; $114

Question 14

-The above figure shows a firm in monopolistic competition. At the profit maximizing level of output,

Accepted Answer

A)  the firm is making a positive economic profit. 
B)  the firm incurs an economic loss. 
C)  the firm is making zero economic profit. 
D)  this firm would choose to shut down in the short run. 
A)  the firm is making a positive economic profit. 
B)  the firm incurs an economic loss. 
C)  the firm is making zero economic profit. 
D)  this firm would choose to shut down in the short run.

Question 15

Which of the following statements is FALSE concerning monopolistic competition?

Accepted Answer

A)  There are many firms. 
B)  Firms sell a differentiated product. 
C)  Each firm's actions influence rival firms. 
D)  Firms are free to enter and exit. 
A)  There are many firms. 
B)  Firms sell a differentiated product. 
C)  Each firm's actions influence rival firms. 
D)  Firms are free to enter and exit.

Question 16

-The above figure shows a firm in monopolistic competition. What price will the firm charge?

Accepted Answer

A)  $12 
B)  $24 
C)  $36 
D)  None of the above answers is correct. 
A)  $12 
B)  $24 
C)  $36 
D)  None of the above answers is correct.

Question 17

Monopolistic competition is defined as a type of market structure where

Accepted Answer

A)  many firms produce the good. 
B)  firms produce a homogeneous good. 
C)  there are barriers to entry. 
D)  firms can earn positive profit in the long run. 
A)  many firms produce the good. 
B)  firms produce a homogeneous good. 
C)  there are barriers to entry. 
D)  firms can earn positive profit in the long run.

Question 18

A characteristic of monopolistic competition is that each firm

Accepted Answer

A)  faces perfectly elastic demand. 
B)  faces a downward-sloping demand curve. 
C)  has a perfectly elastic supply. 
D)  has a perfectly inelastic supply. 
A)  faces perfectly elastic demand. 
B)  faces a downward-sloping demand curve. 
C)  has a perfectly elastic supply. 
D)  has a perfectly inelastic supply.

Question 19

A monopolistically competitive firm will always choose to produce where

Accepted Answer

A)  marginal revenue equals marginal cost. 
B)  marginal cost meets the demand curve. 
C)  average total cost meets the demand curve. 
D)  average total cost is minimized. 
A)  marginal revenue equals marginal cost. 
B)  marginal cost meets the demand curve. 
C)  average total cost meets the demand curve. 
D)  average total cost is minimized.

Question 20

A firm in monopolistic competition has some degree of price-setting power because

Accepted Answer

A)  in the long run it earns a normal profit. 
B)  it can never earn less than normal profit. 
C)  the price it charges is never more than its marginal cost. 
D)  if it raises its price, the quantity it can sell will not decrease to zero. 
A)  in the long run it earns a normal profit. 
B)  it can never earn less than normal profit. 
C)  the price it charges is never more than its marginal cost. 
D)  if it raises its price, the quantity it can sell will not decrease to zero.

Exam 14: Monopolistic Competition

In the long run, firms in monopolistic competition produce at a level that is ________ the efficient scale of output.

-The above figure shows the demand and cost curves for a firm in ________ in the ________.

A product that is a close substitute but not a perfect substitute for the products of the other firms is called

In the short run, a firm in a monopolistic competition will produce the amount of output where its

When comparing perfect competition and monopolistic competition, we find that

In monopolistic competition, there are

A textbook publisher is in monopolistic competition. The firm can sell no books at $100 a book, but for each $10 cut in price, the quantity of books it can sell increases by 20 books a day. The firm's average variable cost and marginal cost is a constant $20 per book. What is the firm's markup?

In the long run, all firms in a monopolistically competitive industry make

The best example of a good sold in a monopolistically competitive market is

Monopolistic competition differs from monopoly because in monopolistic competition,

-The above figure shows a firm in monopolistic competition. At the profit maximizing level of output,

Which of the following statements is FALSE concerning monopolistic competition?

-The above figure shows a firm in monopolistic competition. What price will the firm charge?

Monopolistic competition is defined as a type of market structure where

A characteristic of monopolistic competition is that each firm

A monopolistically competitive firm will always choose to produce where

A firm in monopolistic competition has some degree of price-setting power because

What Is Economics

The Economic Problem

Demand and Supply

Elasticity

Efficiency and Equity

Government Actions in Markets

Global Markets in Action

Utility and Demand

Possibilities, Preferences, and Choices

Organizing Production

Output and Costs

Perfect Competition

Monopoly

Oligopoly

Public Choices and Public Goods

Externalities and the Environment

Markets for Factors of Production

Economic Inequality

Uncertainty and Information

Extension A: Review

Extension B: Review

Extension C: Review

Extension D: Review

Extension E: Review

Extension F: Review

Filters

-The above figure shows the demand and cost curves for a firm in in the .