Question 1

The monopolistic competitor is a price

Accepted Answer

A) taker, because of the many buyers and sellers in the market. 
B) searcher, because of product differentiation. 
C) taker, because of identical products. 
D) searcher, because of the few buyers and sellers in the market. 
E) searcher, because of the few buyers and sellers in the market and product differentiation. 
A) taker, because of the many buyers and sellers in the market. 
B) searcher, because of product differentiation. 
C) taker, because of identical products. 
D) searcher, because of the few buyers and sellers in the market. 
E) searcher, because of the few buyers and sellers in the market and product differentiation.

Question 2

Which of the following industries is the best real-world example of monopolistic competition?

Accepted Answer

A) soft drinks 
B) electricity generation 
C) automobiles 
D) computer software 
A) soft drinks 
B) electricity generation 
C) automobiles 
D) computer software

Question 3

Exhibit 24-8
  
-Refer to Exhibit 24-8. Average total cost at the profit-maximizing level of output equals

Accepted Answer

A) $120. 
B) $140. 
C) $70. 
D) $50. 
E) There is not enough information given to answer this question. 
A) $120. 
B) $140. 
C) $70. 
D) $50. 
E) There is not enough information given to answer this question.

Question 4

The excess capacity theorem states that in equilibrium a monopolistic competitor will produce an output level larger than the one that would minimize its unit costs.

Accepted Answer

A) True 
 B)False

Question 5

Cartels are easy to form and to maintain.

Accepted Answer

A) True 
 B)False

Question 6

A monopolistic competitive firm is a price taker, while an oligopolist is a price searcher.

Accepted Answer

A) True 
 B)False

Question 7

In an oligopolistic market, the product being produced can be either homogeneous or differentiated.

Accepted Answer

A) True 
 B)False

Question 8

Generally, the monopolistic competitor is in long run equilibrium when

Accepted Answer

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

Question 9

The profit-maximizing monopolistic competitive firm produces a level of output at which marginal revenue equals marginal cost.

Accepted Answer

A) True 
 B)False

Question 10

The monopolistic competitor is a

Accepted Answer

A) price taker. 
B) price searcher. 
C) single seller of a good with no close substitutes. 
D) firm that faces a horizontal demand curve. 
E) b and c 
A) price taker. 
B) price searcher. 
C) single seller of a good with no close substitutes. 
D) firm that faces a horizontal demand curve. 
E) b and c

Question 11

Some monopolistic competitive firms earn positive economic profits in the long run because

Accepted Answer

A) there are high barriers to entry in monopolistic competition. 
B) they have successfully differentiated their products from their competitors' products. 
C) there is easy entry and exit. 
D) b and c 
E) none of the above 
A) there are high barriers to entry in monopolistic competition. 
B) they have successfully differentiated their products from their competitors' products. 
C) there is easy entry and exit. 
D) b and c 
E) none of the above

Question 12

In which market structure can the good being produced be either homogeneous or differentiated?

Accepted Answer

A) monopolistic competition 
B) oligopoly 
C) monopoly 
D) perfect competition 
E) none of the above 
A) monopolistic competition 
B) oligopoly 
C) monopoly 
D) perfect competition 
E) none of the above

Question 13

In recent years, industries with high four- and eight-firm concentration ratios include cars, cereal breakfast foods, and farm machinery.

Accepted Answer

A) True 
 B)False

Question 14

Concentration ratios are not perfect guides to industry concentration, because they

Accepted Answer

A) do not take into account foreign competition and competition from substitute goods. 
B) take into account foreign competition and competition from substitute goods. 
C) do not take into account advertising expenditures. 
D) do not take into account tax payments. 
A) do not take into account foreign competition and competition from substitute goods. 
B) take into account foreign competition and competition from substitute goods. 
C) do not take into account advertising expenditures. 
D) do not take into account tax payments.

Question 15

The monopolistic competitor's demand curve is

Accepted Answer

A) perfectly elastic because of the many buyers and sellers in the market. 
B) downward sloping because of product differentiation. 
C) perfectly elastic because of identical products. 
D) downward sloping because of the few buyers and sellers in the market. 
E) none of the above 
A) perfectly elastic because of the many buyers and sellers in the market. 
B) downward sloping because of product differentiation. 
C) perfectly elastic because of identical products. 
D) downward sloping because of the few buyers and sellers in the market. 
E) none of the above

Question 16

A concentration ratio indicates the

Accepted Answer

A) number of firms in an industry. 
B) number of large firms in an industry compared to the number of large firms in another related industry. 
C) percentage of total sales accounted for by the (for example) four largest firms. 
D) percentage of sellers in an industry relative to the number of buyers. 
E) percentage of sellers in an industry protected by barriers to entry relative to the number of sellers that wish to enter. 
A) number of firms in an industry. 
B) number of large firms in an industry compared to the number of large firms in another related industry. 
C) percentage of total sales accounted for by the (for example) four largest firms. 
D) percentage of sellers in an industry relative to the number of buyers. 
E) percentage of sellers in an industry protected by barriers to entry relative to the number of sellers that wish to enter.

Question 17

Compare and contrast the following market structures: perfect competition and monopolistic competition.

Accepted Answer

Both market structures share the followi

Question 18

The profit-maximizing perfectly competitive firm charges a price equal to __________ while the profit-maximizing monopolistic competitive firm charges a price __________.

Accepted Answer

A) marginal revenue; equal to marginal cost 
B) marginal cost; greater than marginal cost 
C) marginal revenue; greater than marginal revenue 
D) average fixed cost; greater than average total cost 
E) b and c 
A) marginal revenue; equal to marginal cost 
B) marginal cost; greater than marginal cost 
C) marginal revenue; greater than marginal revenue 
D) average fixed cost; greater than average total cost 
E) b and c

Question 19

A monopolistic competitor faces a __________ demand curve and its price is __________ marginal revenue.

Accepted Answer

A) horizontal; equal to 
B) downward-sloping; equal to 
C) horizontal; greater than 
D) downward-sloping; greater than 
A) horizontal; equal to 
B) downward-sloping; equal to 
C) horizontal; greater than 
D) downward-sloping; greater than

Question 20

It has been argued that because the monopolistic competitive firm faces a downward-sloping demand curve, in long run equilibrium it

Accepted Answer

A) underutilizes its plant size. 
B) has excess capacity. 
C) produces an output smaller than the one that would minimize its costs of production. 
D) a and b 
E) all of the above 
A) underutilizes its plant size. 
B) has excess capacity. 
C) produces an output smaller than the one that would minimize its costs of production. 
D) a and b 
E) all of the above

Exam 24: Monopolistic Competition Oligopoly and Game Theory

The monopolistic competitor is a price

Which of the following industries is the best real-world example of monopolistic competition?

Exhibit 24-8 -Refer to Exhibit 24-8. Average total cost at the profit-maximizing level of output equals

The excess capacity theorem states that in equilibrium a monopolistic competitor will produce an output level larger than the one that would minimize its unit costs.

Cartels are easy to form and to maintain.

A monopolistic competitive firm is a price taker, while an oligopolist is a price searcher.

In an oligopolistic market, the product being produced can be either homogeneous or differentiated.

Generally, the monopolistic competitor is in long run equilibrium when

The profit-maximizing monopolistic competitive firm produces a level of output at which marginal revenue equals marginal cost.

The monopolistic competitor is a

Some monopolistic competitive firms earn positive economic profits in the long run because

In which market structure can the good being produced be either homogeneous or differentiated?

In recent years, industries with high four- and eight-firm concentration ratios include cars, cereal breakfast foods, and farm machinery.

Concentration ratios are not perfect guides to industry concentration, because they

The monopolistic competitor's demand curve is

A concentration ratio indicates the

Compare and contrast the following market structures: perfect competition and monopolistic competition.

The profit-maximizing perfectly competitive firm charges a price equal to __________ while the profit-maximizing monopolistic competitive firm charges a price __________.

A monopolistic competitor faces a __________ demand curve and its price is __________ marginal revenue.

It has been argued that because the monopolistic competitive firm faces a downward-sloping demand curve, in long run equilibrium it

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The profit-maximizing perfectly competitive firm charges a price equal to while the profit-maximizing monopolistic competitive firm charges a price .

A monopolistic competitor faces a demand curve and its price is marginal revenue.