Question 1

Firms use two marketing tools to differentiate their products. What are these two tools?

Accepted Answer

A)  lobbying and word of mouth 
B)  market research and demand estimation 
C)  brand management and advertising 
D)  consumer surveys and market experiments 
A)  lobbying and word of mouth 
B)  market research and demand estimation 
C)  brand management and advertising 
D)  consumer surveys and market experiments

Question 2

How does the long-run equilibrium of a monopolistically competitive industry differ from that of a perfectly competitive industry?

Accepted Answer

A)  A firm in monopolistic competition will earn economic profits but a firm in perfect competition earns zero profit. 
B)  A firm in monopolistic competition will charge a price higher than the average cost of production but a firm in perfect competition charges a price equal to the average cost of production. 
C)  A firm in monopolistic competition does not take full advantage of its economies of scale but a firm in perfect competition produces at the lowest average cost possible. 
D)  A firm in monopolistic competition produces an allocatively efficient output level while a firm in perfect competition produces a productively efficient output level. 
A)  A firm in monopolistic competition will earn economic profits but a firm in perfect competition earns zero profit. 
B)  A firm in monopolistic competition will charge a price higher than the average cost of production but a firm in perfect competition charges a price equal to the average cost of production. 
C)  A firm in monopolistic competition does not take full advantage of its economies of scale but a firm in perfect competition produces at the lowest average cost possible. 
D)  A firm in monopolistic competition produces an allocatively efficient output level while a firm in perfect competition produces a productively efficient output level.

Question 3

In San Francisco there are many restaurants that specialize in a wide variety of cuisines. Patronage at these restaurants is influenced by factors such as tastes, price, and location. This market is

Accepted Answer

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

Question 4

Consumers benefit from monopolistic competition by

Accepted Answer

A)  being able to choose from products more closely suited to their tastes. 
B)  paying the lowest possible price for the product. 
C)  paying the same price as everyone else. 
D)  being able to purchase high-quality products at low prices. 
A)  being able to choose from products more closely suited to their tastes. 
B)  paying the lowest possible price for the product. 
C)  paying the same price as everyone else. 
D)  being able to purchase high-quality products at low prices.

Question 5

Explain the significance of brand management to a firm that has differentiated its product. Comment specifically on the importance of obtaining a trademark.

Accepted Answer

The owner or manager of a firm that has

Question 6

Which of the following is true for a monopolistically competitive firm in long-run equilibrium?

Accepted Answer

A)  P = ATC and MR = MC. 
B)  P = ATC and P = MC. 
C)  P > ATC and P > MR. 
D)  P > MR and MC = ATC. 
A)  P = ATC and MR = MC. 
B)  P = ATC and P = MC. 
C)  P > ATC and P > MR. 
D)  P > MR and MC = ATC.

Question 7

Long-run equilibrium under monopolistic competition is similar to that under perfect competition in that

Accepted Answer

A)  firms produce at the minimum point of their average cost curves. 
B)  price equals marginal cost. 
C)  firms earn normal profits. 
D)  price equals marginal revenue. 
A)  firms produce at the minimum point of their average cost curves. 
B)  price equals marginal cost. 
C)  firms earn normal profits. 
D)  price equals marginal revenue.

Question 8

A major difference between monopolistic competition and perfect competition is

Accepted Answer

A)  the number of sellers in the markets. 
B)  the degree by which the market demand curves slope downwards. 
C)  that products are not standardized in monopolistic competition unlike in perfect competition. 
D)  the barriers to entry in the two markets. 
A)  the number of sellers in the markets. 
B)  the degree by which the market demand curves slope downwards. 
C)  that products are not standardized in monopolistic competition unlike in perfect competition. 
D)  the barriers to entry in the two markets.

Question 9

Being the first to sell a particular good can give a firm advantages over other firms that sell similar products. What is the name given to these advantages?

Accepted Answer

A)  first-mover 
B)  first come, first served 
C)  follow the leader 
D)  first to market 
A)  first-mover 
B)  first come, first served 
C)  follow the leader 
D)  first to market

Question 10

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. Victoria's profit-maximizing quantity (Q) and price (P) are

Accepted Answer

A)  Q = 3; P = $7. 
B)  Q = 4; P = $6. 
C)  Q = 5; P = $5. 
D)  Q = 6; P = $4. 
A)  Q = 3; P = $7. 
B)  Q = 4; P = $6. 
C)  Q = 5; P = $5. 
D)  Q = 6; P = $4.

Question 11

Figure 13-19  
-Refer to Figure 13-19 to answer the following questions.
a. What is the productively efficient output?
b. What is the allocatively efficient output?
c. What is the amount of excess capacity?
d. Suppose the firm is currently producing 14 units. What happens if it increases output to 17 units?

Accepted Answer

a. The productively efficient output is

Question 12

Figure 13-17  
-Refer to Figure 13-17. What is the amount of excess capacity?

Accepted Answer

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

Question 13

If a significant number of consumers switch from ordering food delivery from traditional restaurants to ordering from "ghost restaurants", a "ghost restaurant" will likely find its demand curve shifting to the ________ and its marginal revenue curve shifting to the ________ as more competitors enter the market.

Accepted Answer

A)  right; right 
B)  right; left 
C)  left; right 
D)  left; left 
A)  right; right 
B)  right; left 
C)  left; right 
D)  left; left

Question 14

Which of the following is not a characteristic of monopolistic competition?

Accepted Answer

A)  There are many buyers and sellers. 
B)  There are low barriers to entry. 
C)  Average revenue is equal to price. 
D)  The products sold by all firms are identical. 
A)  There are many buyers and sellers. 
B)  There are low barriers to entry. 
C)  Average revenue is equal to price. 
D)  The products sold by all firms are identical.

Question 15

Only one of the following statements is correct. The statements compare perfectly competitive (PC) markets and monopolistically competitive (MC) markets. Which statement is correct?

Accepted Answer

A)  Productive efficiency is achieved in both PC and MC markets. Allocative efficiency is achieved only in MC markets. 
B)  Allocative efficiency is achieved in both PC and MC markets. Productive efficiency is achieved only in PC markets. 
C)  Productive efficiency and allocative efficiency are both achieved in PC markets. Neither is achieved in MC markets. 
D)  Allocative efficiency is achieved only in PC markets. Productive efficiency is achieved only in MC markets. 
A)  Productive efficiency is achieved in both PC and MC markets. Allocative efficiency is achieved only in MC markets. 
B)  Allocative efficiency is achieved in both PC and MC markets. Productive efficiency is achieved only in PC markets. 
C)  Productive efficiency and allocative efficiency are both achieved in PC markets. Neither is achieved in MC markets. 
D)  Allocative efficiency is achieved only in PC markets. Productive efficiency is achieved only in MC markets.

Question 16

When new firms are encouraged to enter a monopolistically competitive market

Accepted Answer

A)  some existing firms must be earning economic profits. 
B)  they do so because there is insufficient product differentiation. 
C)  the demand curve facing an existing firm shifts to the right. 
D)  the marginal cost curve facing an existing firm shifts downwards. 
A)  some existing firms must be earning economic profits. 
B)  they do so because there is insufficient product differentiation. 
C)  the demand curve facing an existing firm shifts to the right. 
D)  the marginal cost curve facing an existing firm shifts downwards.

Question 17

Which of the following will not happen as a consequence of a monopolistically competitive firm suffering economic losses in the short run?

Accepted Answer

A)  The firm's demand curve will shift to the right if it stays in business in the long run. 
B)  The firm will exit the industry if it continues to suffer economic losses. 
C)  The firm will break even if its stays in business in the long run. 
D)  In the long run, the firm will be able to charge a price that is greater than its average total cost. 
A)  The firm's demand curve will shift to the right if it stays in business in the long run. 
B)  The firm will exit the industry if it continues to suffer economic losses. 
C)  The firm will break even if its stays in business in the long run. 
D)  In the long run, the firm will be able to charge a price that is greater than its average total cost.

Question 18

Which of the following is not an example of a monopolistically competitive market?

Accepted Answer

A)  automobile producers 
B)  supermarkets 
C)  gas stations 
D)  makers of women's clothing 
A)  automobile producers 
B)  supermarkets 
C)  gas stations 
D)  makers of women's clothing

Question 19

If firms in a monopolistically competitive market are earning economic profits, which of the following scenarios best reflects the change a representative firm experiences as the market adjusts to its long-run equilibrium?

Accepted Answer

A)  Demand decreases and becomes less elastic. 
B)  Demand decreases and becomes more elastic. 
C)  Demand increases and becomes less elastic. 
D)  Demand increases and becomes more elastic. 
A)  Demand decreases and becomes less elastic. 
B)  Demand decreases and becomes more elastic. 
C)  Demand increases and becomes less elastic. 
D)  Demand increases and becomes more elastic.

Question 20

Figure 13-4   Figure 13-4 shows short-run cost and demand curves for a monopolistically competitive firm in the market for designer watches.
-Refer to Figure 13-4. What is the area that represents the total revenue made by the firm?

Accepted Answer

A)  0P0aQa 
B)  0P1bQa 
C)  0P2cQa 
D)  0P3dQa 
A)  0P0aQa 
B)  0P1bQa 
C)  0P2cQa 
D)  0P3dQa

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

Firms use two marketing tools to differentiate their products. What are these two tools?

How does the long-run equilibrium of a monopolistically competitive industry differ from that of a perfectly competitive industry?

In San Francisco there are many restaurants that specialize in a wide variety of cuisines. Patronage at these restaurants is influenced by factors such as tastes, price, and location. This market is

Consumers benefit from monopolistic competition by

Explain the significance of brand management to a firm that has differentiated its product. Comment specifically on the importance of obtaining a trademark.

Which of the following is true for a monopolistically competitive firm in long-run equilibrium?

Long-run equilibrium under monopolistic competition is similar to that under perfect competition in that

A major difference between monopolistic competition and perfect competition is

Being the first to sell a particular good can give a firm advantages over other firms that sell similar products. What is the name given to these advantages?

Figure 13-17 -Refer to Figure 13-17. What is the amount of excess capacity?

Which of the following is not a characteristic of monopolistic competition?

Only one of the following statements is correct. The statements compare perfectly competitive (PC) markets and monopolistically competitive (MC) markets. Which statement is correct?

When new firms are encouraged to enter a monopolistically competitive market

Which of the following will not happen as a consequence of a monopolistically competitive firm suffering economic losses in the short run?

Which of the following is not an example of a monopolistically competitive market?

If firms in a monopolistically competitive market are earning economic profits, which of the following scenarios best reflects the change a representative firm experiences as the market adjusts to its long-run equilibrium?

Figure 13-4 Figure 13-4 shows short-run cost and demand curves for a monopolistically competitive firm in the market for designer watches. -Refer to Figure 13-4. What is the area that represents the total revenue made by the firm?

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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