Question 1

What are the formulas for total revenue, average revenue, and marginal revenue.

Accepted Answer

Total revenue equals price × q

Question 2

How might a monopolistically competitive firm continually earn economic profit greater than zero?

Accepted Answer

A monopolistically competitive

Question 3

If a monopolistically competitive firm breaks even, the firm is earning as much in this industry as it could in any other comparable industry.

Accepted Answer

A) True 
 B)False

Question 4

The key characteristics of a monopolistically competitive market structure include

Accepted Answer

A)  few sellers. 
B)  sellers selling similar but differentiated products. 
C)  high barriers to entry. 
D)  sellers acting to maximize revenue. 
A)  few sellers. 
B)  sellers selling similar but differentiated products. 
C)  high barriers to entry. 
D)  sellers acting to maximize revenue.

Question 5

Complete the following table.

Accepted Answer

The answer of Complete the following table.
  ...

Question 6

A firm that successfully differentiates its product or lowers its average cost of production creates

Accepted Answer

A)  value for its customers. 
B)  entry barriers into its market. 
C)  a perfectly inelastic demand curve for its product. 
D)  economies of scale. 
A)  value for its customers. 
B)  entry barriers into its market. 
C)  a perfectly inelastic demand curve for its product. 
D)  economies of scale.

Question 7

Figure 13-17  
-Refer to Figure 13-17. What is the productively efficient output for the firm represented in the diagram?

Accepted Answer

A)  Qf units 
B)  Qg units 
C)  Qh units 
D)  Qj units 
A)  Qf units 
B)  Qg units 
C)  Qh units 
D)  Qj units

Question 8

Monopolistic competition is a market structure in which

Accepted Answer

A)  firms produce and sell products for which there are no close substitutes. 
B)  the demand curve for a typical firm is horizontal. 
C)  firms cannot influence the market price. 
D)  barriers to entry are low. 
A)  firms produce and sell products for which there are no close substitutes. 
B)  the demand curve for a typical firm is horizontal. 
C)  firms cannot influence the market price. 
D)  barriers to entry are low.

Question 9

If Panera Bread's "clean food" strategy succeeds and customers are willing to pay higher prices for their menu items, the company will

Accepted Answer

A)  no longer be monopolistically competitive. 
B)  continue to earn substantial economic profits in the long run. 
C)  eventually suffer economic losses, as do all fast-casual restaurants. 
D)  likely attract competitors that offer the same kind of food, and all else equal, eventually economic profits will be competed away. 
A)  no longer be monopolistically competitive. 
B)  continue to earn substantial economic profits in the long run. 
C)  eventually suffer economic losses, as do all fast-casual restaurants. 
D)  likely attract competitors that offer the same kind of food, and all else equal, eventually economic profits will be competed away.

Question 10

Table 13-2
   Eco Energy is a monopolistically competitive producer of a sports beverage called Power On. Table 13-2 shows the firm's demand and cost schedules.
-Refer to Table 13-2. What is Eco Energy's profit?

Accepted Answer

A)  $125 
B)  $140 
C)  $145 
D)  $150 
A)  $125 
B)  $140 
C)  $145 
D)  $150

Question 11

A monopolistically competitive industry that earns economic profits in the short run will

Accepted Answer

A)  continue to earn economic profits in the long run. 
B)  experience the entry of new rival firms into the industry in the long run. 
C)  experience the exit of existing firms out of the industry in the long run. 
D)  experience a rise in demand in the long run. 
A)  continue to earn economic profits in the long run. 
B)  experience the entry of new rival firms into the industry in the long run. 
C)  experience the exit of existing firms out of the industry in the long run. 
D)  experience a rise in demand in the long run.

Question 12

Figure 13-14   Figure 13-14 illustrates a monopolistically competitive firm.
-Refer to Figure 13-14. Which of the following statements describes the firm depicted in the diagram?

Accepted Answer

A)  The firm is making no economic profit and will exit the industry. 
B)  The firm is suffering an economic loss by producing at Q0 but will break even if it increases its output to Q1. 
C)  The firm achieves productive efficiency by producing at Q0. 
D)  The firm is in long-run equilibrium and is breaking even. 
A)  The firm is making no economic profit and will exit the industry. 
B)  The firm is suffering an economic loss by producing at Q0 but will break even if it increases its output to Q1. 
C)  The firm achieves productive efficiency by producing at Q0. 
D)  The firm is in long-run equilibrium and is breaking even.

Question 13

Although advertising raises the price of a monopolistic competitor's product, it does confer a benefit to consumers. Which of the following is a benefit to consumers?

Accepted Answer

A)  Advertising acts as a barrier to entry. 
B)  Advertising engenders brand loyalty. 
C)  Advertising could provide consumers with useful information about new products and enable them to comparison shop. 
D)  Advertised products tend to be of higher quality so consumers feel special when they consume advertised products. 
A)  Advertising acts as a barrier to entry. 
B)  Advertising engenders brand loyalty. 
C)  Advertising could provide consumers with useful information about new products and enable them to comparison shop. 
D)  Advertised products tend to be of higher quality so consumers feel special when they consume advertised products.

Question 14

A trademark grants a firm legal protection against other firms using the name of its product. When a firm has been granted a trademark, it

Accepted Answer

A)  still faces the possibility that the name will become widely used and no longer associated with a specific company. 
B)  does not have to worry about legally enforcing the trademark; this is the responsibility of the legal system. 
C)  still must apply for a copyright and a patent to ensure that no other firm will use the product's name. 
D)  must spend an annual amount on advertising the product each year; the amount it must spend is negotiated by the firm and the government agency that grants the trademark. 
A)  still faces the possibility that the name will become widely used and no longer associated with a specific company. 
B)  does not have to worry about legally enforcing the trademark; this is the responsibility of the legal system. 
C)  still must apply for a copyright and a patent to ensure that no other firm will use the product's name. 
D)  must spend an annual amount on advertising the product each year; the amount it must spend is negotiated by the firm and the government agency that grants the trademark.

Question 15

There are many wheat farmers in the world, and there are also many McDonald's restaurants in the world. Why, then, does a McDonald's restaurant face a downward-sloping demand curve while a wheat farmer faces a horizontal demand curve?

Accepted Answer

Wheat framers are selling identical good

Question 16

Which of the following statements is true about monopolistically competitive firms?

Accepted Answer

A)  Unlike perfectly competitive firms, monopolistically competitive firms are able to raise their prices without losing all of their customers. 
B)  Like perfectly competitive firms, monopolistically competitive firms are not able to raise prices without losing all of their customers because they face competition from firms selling similar products. 
C)  Like perfectly competitive firms, monopolistically competitive firms maximize their profits by setting price equal to marginal cost. 
D)  Unlike perfectly competitive firms, monopolistically competitive face perfectly inelastic demand curves. 
A)  Unlike perfectly competitive firms, monopolistically competitive firms are able to raise their prices without losing all of their customers. 
B)  Like perfectly competitive firms, monopolistically competitive firms are not able to raise prices without losing all of their customers because they face competition from firms selling similar products. 
C)  Like perfectly competitive firms, monopolistically competitive firms maximize their profits by setting price equal to marginal cost. 
D)  Unlike perfectly competitive firms, monopolistically competitive face perfectly inelastic demand curves.

Question 17

Table 13-4
   Table 13-4 lists estimated revenues and costs (per week) for plastic vials (100 vials per box) for the Victoria Biological Supplies Company. Victoria sells plastic vials to universities and private research laboratories.
-Refer to Table 13-4. At Victoria's profit-maximizing output,

Accepted Answer

A)  profit equals $2. 
B)  total revenue equals $24 and total cost equals $20. 
C)  total revenue equals $25 and total cost equals $22. 
D)  total revenue equals $21 and total cost equals $17. 
A)  profit equals $2. 
B)  total revenue equals $24 and total cost equals $20. 
C)  total revenue equals $25 and total cost equals $22. 
D)  total revenue equals $21 and total cost equals $17.

Question 18

One of the assumptions of monopolistic competition is that firms produce differentiated products. What does this assumption imply about the demand curve facing a representative firm?

Accepted Answer

Product differentiation is a s

Question 19

A monopolistically competitive firm chooses

Accepted Answer

A)  both the quantity of output to produce and the price at which it will sell its output. 
B)  the price of the product it sells but market forces determine the quantity it will be able to sell. 
C)  the quantity of output to produce but the price of the product it sells is determined collectively by all firms in the industry. 
D)  the price of the product it sells but the quantity of output to produce is agreed upon by all firms in the industry. 
A)  both the quantity of output to produce and the price at which it will sell its output. 
B)  the price of the product it sells but market forces determine the quantity it will be able to sell. 
C)  the quantity of output to produce but the price of the product it sells is determined collectively by all firms in the industry. 
D)  the price of the product it sells but the quantity of output to produce is agreed upon by all firms in the industry.

Question 20

When a monopolistically competitive firm lowers its price, one good thing happens to the firm. What is this "one good thing" called?

Accepted Answer

A)  the output effect 
B)  the price effect 
C)  the income effect 
D)  the substitution effect 
A)  the output effect 
B)  the price effect 
C)  the income effect 
D)  the substitution effect

Exam 13: Monopolistic Competition: the Competitive Model in a More Realistic Setting

What are the formulas for total revenue, average revenue, and marginal revenue.

How might a monopolistically competitive firm continually earn economic profit greater than zero?

If a monopolistically competitive firm breaks even, the firm is earning as much in this industry as it could in any other comparable industry.

The key characteristics of a monopolistically competitive market structure include

Complete the following table.

A firm that successfully differentiates its product or lowers its average cost of production creates

Figure 13-17 -Refer to Figure 13-17. What is the productively efficient output for the firm represented in the diagram?

Monopolistic competition is a market structure in which

If Panera Bread's "clean food" strategy succeeds and customers are willing to pay higher prices for their menu items, the company will

Table 13-2 Eco Energy is a monopolistically competitive producer of a sports beverage called Power On. Table 13-2 shows the firm's demand and cost schedules. -Refer to Table 13-2. What is Eco Energy's profit?

A monopolistically competitive industry that earns economic profits in the short run will

Figure 13-14 Figure 13-14 illustrates a monopolistically competitive firm. -Refer to Figure 13-14. Which of the following statements describes the firm depicted in the diagram?

Although advertising raises the price of a monopolistic competitor's product, it does confer a benefit to consumers. Which of the following is a benefit to consumers?

A trademark grants a firm legal protection against other firms using the name of its product. When a firm has been granted a trademark, it

There are many wheat farmers in the world, and there are also many McDonald's restaurants in the world. Why, then, does a McDonald's restaurant face a downward-sloping demand curve while a wheat farmer faces a horizontal demand curve?

Which of the following statements is true about monopolistically competitive firms?

Table 13-4 Table 13-4 lists estimated revenues and costs (per week) for plastic vials (100 vials per box) for the Victoria Biological Supplies Company. Victoria sells plastic vials to universities and private research laboratories. -Refer to Table 13-4. At Victoria's profit-maximizing output,

One of the assumptions of monopolistic competition is that firms produce differentiated products. What does this assumption imply about the demand curve facing a representative firm?

A monopolistically competitive firm chooses

When a monopolistically competitive firm lowers its price, one good thing happens to the firm. What is this "one good thing" called?

Economics: Foundations and Models

Trade-Offs, Comparative Advantage, and the Market System

Where Prices Come From: the Interaction of Demand and Supply

Economic Efficiency, Government Price Setting, and Taxes

Externalities, Environmental Policy, and Public Goods

Elasticity: the Responsiveness of Demand and Supply

The Economics of Health Care

Firms, the Stock Market, and Corporate Governance

Comparative Advantage and the Gains From International Trade

Consumer Choice and Behavioral Economics

Technology, Production, and Costs

Firms in Perfectly Competitive Markets

Oligopoly: Firms in Less Competitive Markets

Monopoly and Antitrust Policy

Pricing Strategy

The Markets for Labor and Other Factors of Production

Public Choice, Taxes, and the Distribution of Income

Gdp: Measuring Total Production and Income

Unemployment and Inflation

Economic Growth, the Financial System, and Business Cycles

Long-Run Economic Growth: Sources and Policies

Aggregate Expenditure and Output in the Short Run

Aggregate Demand and Aggregate Supply Analysis

Money, Banks, and the Federal Reserve System

Monetary Policy

Fiscal Policy

Inflation, Unemployment, and Federal Reserve Policy

Macroeconomics in an Open Economy

The International Financial System

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