Question 1

In which of the following ways has the Internet has had a significant influence on advertising?

Accepted Answer

A)  The Internet limits firms from actively interacting with customers. 
B)  The Internet has improved firms' ability to target specific markets. 
C)  The Internet has reduced the level and transparency of informational advertising. 
D)  The Internet has increased spending on advertising. 
A)  The Internet limits firms from actively interacting with customers. 
B)  The Internet has improved firms' ability to target specific markets. 
C)  The Internet has reduced the level and transparency of informational advertising. 
D)  The Internet has increased spending on advertising. B

Question 2

The airline industry is a good example of a monopolistically competitive industry.

Accepted Answer

A) True 
 B)False  False

Question 3

Monopolistically competitive firms can use product differentiation to do which of the following?

Accepted Answer

A)  guarantee long-run profitability 
B)  block entry of all other firms 
C)  provide consumers with commitment devices 
D)  gain complete control over the price of their product 
A)  guarantee long-run profitability 
B)  block entry of all other firms 
C)  provide consumers with commitment devices 
D)  gain complete control over the price of their product C

Question 4

Monopolistically competitive firms use product differentiation to

Accepted Answer

A)  ensure long-run profits. 
B)  achieve market power. 
C)  block other firms from entering the industry. 
D)  limit the number of firms in the industry. 
A)  ensure long-run profits. 
B)  achieve market power. 
C)  block other firms from entering the industry. 
D)  limit the number of firms in the industry.

Question 5

The Internet has had a significant influence on advertising in all of the following ways except

Accepted Answer

A)  the Internet allows firms to actively interact with customers. 
B)  the Internet has improved firms' ability to target specific markets. 
C)  the Internet has reduced the level and transparency of informational advertising. 
D)  the Internet has reduced spending on advertising. 
A)  the Internet allows firms to actively interact with customers. 
B)  the Internet has improved firms' ability to target specific markets. 
C)  the Internet has reduced the level and transparency of informational advertising. 
D)  the Internet has reduced spending on advertising.

Question 6

If a monopolistically competitive industry is earning short-run profits, new competitors will enter the industry in the long run and compete away those profits.

Accepted Answer

A) True 
 B)False

Question 7

The restaurant industry is an example of a(n) ________ industry.

Accepted Answer

A)  perfectly competitive 
B)  monopolistic 
C)  monopolistically competitive 
D)  oligopolistic 
A)  perfectly competitive 
B)  monopolistic 
C)  monopolistically competitive 
D)  oligopolistic

Question 8

Behavioral economics

Accepted Answer

A)  blends insights from sociology and economics. 
B)  suggests that too much variety may be welfare enhancing. 
C)  has contributed to microeconomics but not to macroeconomics. 
D)  suggests that consumers purchase health club memberships instead of paying per visit in an attempt to commit themselves to an exercise regime. 
A)  blends insights from sociology and economics. 
B)  suggests that too much variety may be welfare enhancing. 
C)  has contributed to microeconomics but not to macroeconomics. 
D)  suggests that consumers purchase health club memberships instead of paying per visit in an attempt to commit themselves to an exercise regime.

Question 9

In long-run equilibrium for a monopolistically competitive industry,

Accepted Answer

A)  all firms earn a profit. 
B)  all firms break even. 
C)  all firms suffer losses. 
D)  firms can earn a profit, suffer a loss, or break even. 
A)  all firms earn a profit. 
B)  all firms break even. 
C)  all firms suffer losses. 
D)  firms can earn a profit, suffer a loss, or break even.

Question 10

Refer to the information provided in Figure 15.4 below to answer the question(s) that follow.   Figure 15.4
-Refer to Figure 15.4. If the Hand Made Shirt Shop is monopolistically competitive, what is the minimum level of fixed cost that would lead to the firm continuing to operate in the short run?

Accepted Answer

A)  $100 
B)  $1,150 
C)  $1,250 
D)  The firm would continue to operate regardless of the level of fixed costs. 
A)  $100 
B)  $1,150 
C)  $1,250 
D)  The firm would continue to operate regardless of the level of fixed costs.

Question 11

To maximize profit, a monopolistically competitive firm will produce where

Accepted Answer

A)  marginal revenue equals price. 
B)  price equals marginal cost. 
C)  price equals average total cost. 
D)  marginal revenue equals marginal cost. 
A)  marginal revenue equals price. 
B)  price equals marginal cost. 
C)  price equals average total cost. 
D)  marginal revenue equals marginal cost.

Question 12

The feature that distinguishes monopolistic competition from perfect competition is that monopolistically competitive firms are

Accepted Answer

A)  large relative to the market. 
B)  price takers. 
C)  able to block the entry of other firms. 
D)  able to differentiate their products. 
A)  large relative to the market. 
B)  price takers. 
C)  able to block the entry of other firms. 
D)  able to differentiate their products.

Question 13

In a monopolistically competitive industry,

Accepted Answer

A)  firms are large relative to the total market. 
B)  firms are small relative to the total market. 
C)  firms can be either large or small relative to the total market. 
D)  there is only one firm. 
A)  firms are large relative to the total market. 
B)  firms are small relative to the total market. 
C)  firms can be either large or small relative to the total market. 
D)  there is only one firm.

Question 14

A chewing gum manufacturer adds a jalapeño-flavored bubble gum to its product mix. This is an example of horizontal differentiation.

Accepted Answer

A) True 
 B)False

Question 15

Monopolies can ________ in the long run while monopolistically competitive firms ________ due to barriers to entry in monopoly but not in monopolistic competition.

Accepted Answer

A)  break even; cannot 
B)  earn positive economic profits; cannot 
C)  only break even; can only earn positive economic profits 
D)  can never shut down; can 
A)  break even; cannot 
B)  earn positive economic profits; cannot 
C)  only break even; can only earn positive economic profits 
D)  can never shut down; can

Question 16

In a well-working market, the underlying heterogeneity of consumers' tastes in that market are reflected in the level of product variety.

Accepted Answer

A) True 
 B)False

Question 17

Referring to the Economics in Practice on page 320: A successful celebrity endorsement of a product will most likely ________ for the product, resulting in a higher equilibrium price and a larger equilibrium quantity.

Accepted Answer

A)  increase the demand 
B)  increase the supply 
C)  decrease the demand 
D)  decrease the supply 
A)  increase the demand 
B)  increase the supply 
C)  decrease the demand 
D)  decrease the supply

Question 18

In well-functioning markets, all of the following reflect the degree of product variety except

Accepted Answer

A)  differences in consumers' tastes. 
B)  cost economies from standardization. 
C)  gains from network externalities. 
D)  gains from coordination. 
A)  differences in consumers' tastes. 
B)  cost economies from standardization. 
C)  gains from network externalities. 
D)  gains from coordination.

Question 19

In long-run equilibrium in monopolistic competition, P = MR = MC = ATC.

Accepted Answer

A) True 
 B)False

Question 20

Average variable cost is minimized in long-run equilibrium for a monopolistically competitive firm.

Accepted Answer

A) True 
 B)False

Exam 15: Monopolistic Competition

In which of the following ways has the Internet has had a significant influence on advertising?

The airline industry is a good example of a monopolistically competitive industry.

Monopolistically competitive firms can use product differentiation to do which of the following?

Monopolistically competitive firms use product differentiation to

The Internet has had a significant influence on advertising in all of the following ways except

If a monopolistically competitive industry is earning short-run profits, new competitors will enter the industry in the long run and compete away those profits.

The restaurant industry is an example of a(n) ________ industry.

Behavioral economics

In long-run equilibrium for a monopolistically competitive industry,

Refer to the information provided in Figure 15.4 below to answer the question(s) that follow. Figure 15.4 -Refer to Figure 15.4. If the Hand Made Shirt Shop is monopolistically competitive, what is the minimum level of fixed cost that would lead to the firm continuing to operate in the short run?

To maximize profit, a monopolistically competitive firm will produce where

The feature that distinguishes monopolistic competition from perfect competition is that monopolistically competitive firms are

In a monopolistically competitive industry,

A chewing gum manufacturer adds a jalapeño-flavored bubble gum to its product mix. This is an example of horizontal differentiation.

Monopolies can ________ in the long run while monopolistically competitive firms ________ due to barriers to entry in monopoly but not in monopolistic competition.

In a well-working market, the underlying heterogeneity of consumers' tastes in that market are reflected in the level of product variety.

Referring to the Economics in Practice on page 320: A successful celebrity endorsement of a product will most likely ________ for the product, resulting in a higher equilibrium price and a larger equilibrium quantity.

In well-functioning markets, all of the following reflect the degree of product variety except

In long-run equilibrium in monopolistic competition, P = MR = MC = ATC.

Average variable cost is minimized in long-run equilibrium for a monopolistically competitive firm.

The Scope and Method of Economics

The Economic Problem: Scarcity and Choice

Demand, Supply, and Market Equilibrium

Demand and Supply Applications

Elasticity

Household Behavior and Consumer Choice

The Production Process: the Behavior of Profit-Maximizing Firms

Short-Run Costs and Output Decisions

Long-Run Costs and Output Decisions

Input Demand: the Labor and Land Markets

Input Demand: the Capital Market and the Investment Decision

General Equilibrium and the Efficiency of Perfect Competition

Monopoly and Antitrust Policy

Oligopoly

Externalities, Public Goods, and Common Resources

Uncertainty and Asymmetric Information

Income Distribution and Poverty

Public Finance: the Economics of Taxation

International Trade, Comparative Advantage, and Protectionism

Economic Growth in Developing Economies

Critical Thinking About Research

Filters

Monopolies can in the long run while monopolistically competitive firms due to barriers to entry in monopoly but not in monopolistic competition.