Question 1

Consumers' differing tastes are one reason why monopolistic:

Accepted Answer

A) firms encounter large barriers to entry. 
B) competitors earn a positive economic profit in the long run. 
C) competitors set price at MC. 
D) competitors are similar to monopolists. 
A) firms encounter large barriers to entry. 
B) competitors earn a positive economic profit in the long run. 
C) competitors set price at MC. 
D) competitors are similar to monopolists.

Question 2

In long-run equilibrium in perfect competition:

Accepted Answer

A) marginal cost is greater than price. 
B) marginal cost is equal to price. 
C) marginal cost is less than price. 
D) the relationship between marginal cost and price is not predictable. 
A) marginal cost is greater than price. 
B) marginal cost is equal to price. 
C) marginal cost is less than price. 
D) the relationship between marginal cost and price is not predictable.

Question 3

A monopolistically competitive industry, such as corn snack chips, and a perfectly competitive industry, like wheat farming, are alike in that:

Accepted Answer

A) firms in both types of industries produce identical products. 
B) firms in both types of industries produce similar but not identical products. 
C) barriers to entry in both industries are large. 
D) there are many firms in each industry. 
A) firms in both types of industries produce identical products. 
B) firms in both types of industries produce similar but not identical products. 
C) barriers to entry in both industries are large. 
D) there are many firms in each industry.

Question 4

Toby operates a small deli downtown.The deli industry is monopolistically competitive.Toby tells you he is producing the quantity that minimizes his average total cost.Assuming that Toby is maximizing profits, you know Toby's:

Accepted Answer

A) marginal cost is less than his average total cost. 
B) marginal cost is less than his marginal revenue. 
C) price equals his average total cost. 
D) price is more than his average total cost. 
A) marginal cost is less than his average total cost. 
B) marginal cost is less than his marginal revenue. 
C) price equals his average total cost. 
D) price is more than his average total cost.

Question 5

The price in a long-run equilibrium for a monopolistically competitive firm is __________and output is , compared to that of a perfectly competitive firm with an identical production function and cost curves.

Accepted Answer

A) higher; greater . 
B) higher; smaller 
C) lower; greater 
D) lower; smaller 
A) higher; greater . 
B) higher; smaller 
C) lower; greater 
D) lower; smaller

Question 6

In the long run, perfect competitors and monopolistic competitors are similar in that they:

Accepted Answer

A) set price where MR < MC. 
B) produce an output level at which P = ATC. 
C) produce a product that is standardized and hard to 
D) differentiate.earn a positive economic profit. 
A) set price where MR < MC. 
B) produce an output level at which P = ATC. 
C) produce a product that is standardized and hard to 
D) differentiate.earn a positive economic profit.

Question 7

If a monopolistically competitive firm is in long-run equilibrium, then price _.

Accepted Answer

A) equals marginal revenue. 
B) equals average total cost. 
C) is greater than average total cost. 
D) equals marginal cost. 
A) equals marginal revenue. 
B) equals average total cost. 
C) is greater than average total cost. 
D) equals marginal cost.

Question 8

Which of the following statements is correct?

Accepted Answer

A) In the long run, monopolistically competitive firms always experience high economic profits. 
B) In the long run, monopolistically competitive firms tend to experience zero economic profits. 
C) In the long run, it is likely that monopolistically competitive firms experience negative economic profits. 
D) In the long run, it is likely that monopolistically competitive firms experience substantial economic losses. 
A) In the long run, monopolistically competitive firms always experience high economic profits. 
B) In the long run, monopolistically competitive firms tend to experience zero economic profits. 
C) In the long run, it is likely that monopolistically competitive firms experience negative economic profits. 
D) In the long run, it is likely that monopolistically competitive firms experience substantial economic losses.

Question 9

Figure: Profits in Monopolistic Competition     (Figure: Profits in Monopolistic Competition) Look at the figure Profits in Monopolistic Competition.A negative economic profit (or economic loss) is earned if the profit-maximizing price is ________ in panel _.

Accepted Answer

A) E; B 
B) B; A 
C) N; C 
D) O; C 
A) E; B 
B) B; A 
C) N; C 
D) O; C

Question 10

Figure: The Market for Gas Stations     (Figure: The Market for Gas Stations) Look at the figure The Market for Gas Stations.This market is characterized by many firms, differentiated products, easy entry, and easy exit.In long-run equilibrium, the economic profit earned by the typical gas station in the community will be:

Accepted Answer

A) equal to the level shown in the figure. 
B) negative. 
C) zero. 
D) Not enough information is given to answer the question. 
A) equal to the level shown in the figure. 
B) negative. 
C) zero. 
D) Not enough information is given to answer the question.

Question 11

Since a monopolistic competitor charges a price greater than marginal cost, there is a deadweight loss associated with monopolistic competition.False

Accepted Answer

A) True 
 B)False

Question 12

In the long run, monopolistic competitors will:

Accepted Answer

A) earn zero economic profits. 
B) produce at the minimum of their ATC curves. 
C) set price where MC = MR. 
D) collude with other firms. 
A) earn zero economic profits. 
B) produce at the minimum of their ATC curves. 
C) set price where MC = MR. 
D) collude with other firms.

Question 13

Which of the following is true of firms in both perfect competition and monopolistic competition?

Accepted Answer

A) The long-run price is equal to marginal revenue, marginal cost, and average total cost. 
B) Long-run economic profits are equal to zero. 
C) The long-run level of output is at the point where average total cost is minimized. 
D) Price is equal to marginal cost, ensuring that the efficient level of output is produced. 
A) The long-run price is equal to marginal revenue, marginal cost, and average total cost. 
B) Long-run economic profits are equal to zero. 
C) The long-run level of output is at the point where average total cost is minimized. 
D) Price is equal to marginal cost, ensuring that the efficient level of output is produced.

Question 14

Figure: The Restaurant Market   (Figure: The Restaurant Market) The figure The Restaurant Market shows curves facing a typical restaurant in a community.Assume that many firms, differentiated products, and easy entry and easy exit characterize the restaurant market.In long-run equilibrium, the economic profit earned by the typical restaurant in the community will be:

Accepted Answer

A) negative. 
B) zero. 
C) equal to the level shown in the figure. 
D) Not enough information is given to answer the question. 
A) negative. 
B) zero. 
C) equal to the level shown in the figure. 
D) Not enough information is given to answer the question.

Question 15

The conditions for profit maximization and the analysis of short-run equilibrium are identical for monopoly and for a monopolistically competitive firm.False

Accepted Answer

A) True 
 B)False

Question 16

In the market for hamburgers, there is some differentiation and many firms offering hamburgers.This would suggest that the hamburger market is more oligopolistic than monopolistically competitive.True

Accepted Answer

A) True 
 B)False

Question 17

In long-run equilibrium in monopolistic competition:

Accepted Answer

A) marginal cost is greater than price. 
B) marginal cost is equal to price. 
C) marginal cost is less than price. 
D) the relationship between marginal cost and price is not predictable. 
A) marginal cost is greater than price. 
B) marginal cost is equal to price. 
C) marginal cost is less than price. 
D) the relationship between marginal cost and price is not predictable.

Question 18

Suppose Susan owns a business that operates in a market characterized by monopolistic competition.Susan's profit-maximizing price is $12, her profit-maximizing output is 900 units per week, and her profits are $1,800 per week.Susan decides that she needs more profits and therefore raises her price to $15.At the new price of $15:

Accepted Answer

A) profits will increase. 
B) profits will remain at $1,800. 
C) marginal revenue will be greater than marginal cost. 
D) marginal revenue will be less than marginal cost. 
A) profits will increase. 
B) profits will remain at $1,800. 
C) marginal revenue will be greater than marginal cost. 
D) marginal revenue will be less than marginal cost.

Question 19

In order to maximize profits, a firm in monopolistic competition will likely produce:

Accepted Answer

A) at the output level at which marginal cost equals average total cost. 
B) at the output level at which marginal cost is greater than marginal revenue. 
C) at the output level at which marginal cost equals marginal revenue. 
D) at the output level at which marginal cost equals price. 
A) at the output level at which marginal cost equals average total cost. 
B) at the output level at which marginal cost is greater than marginal revenue. 
C) at the output level at which marginal cost equals marginal revenue. 
D) at the output level at which marginal cost equals price.

Question 20

Advertising is an economically productive activity and not a waste of resources because:

Accepted Answer

A) advertisements increase sales. 
B) advertisements can convey information about the product. 
C) advertisements can signal that firms are desperate for customers. 
D) advertising can decrease the costs of production. 
A) advertisements increase sales. 
B) advertisements can convey information about the product. 
C) advertisements can signal that firms are desperate for customers. 
D) advertising can decrease the costs of production.

Consumers' differing tastes are one reason why monopolistic:

In long-run equilibrium in perfect competition:

A monopolistically competitive industry, such as corn snack chips, and a perfectly competitive industry, like wheat farming, are alike in that:

Toby operates a small deli downtown.The deli industry is monopolistically competitive.Toby tells you he is producing the quantity that minimizes his average total cost.Assuming that Toby is maximizing profits, you know Toby's:

The price in a long-run equilibrium for a monopolistically competitive firm is __________and output is , compared to that of a perfectly competitive firm with an identical production function and cost curves.

In the long run, perfect competitors and monopolistic competitors are similar in that they:

If a monopolistically competitive firm is in long-run equilibrium, then price _.

Which of the following statements is correct?

Figure: Profits in Monopolistic Competition (Figure: Profits in Monopolistic Competition) Look at the figure Profits in Monopolistic Competition.A negative economic profit (or economic loss) is earned if the profit-maximizing price is ________ in panel _.

Since a monopolistic competitor charges a price greater than marginal cost, there is a deadweight loss associated with monopolistic competition.False

In the long run, monopolistic competitors will:

Which of the following is true of firms in both perfect competition and monopolistic competition?

The conditions for profit maximization and the analysis of short-run equilibrium are identical for monopoly and for a monopolistically competitive firm.False

In the market for hamburgers, there is some differentiation and many firms offering hamburgers.This would suggest that the hamburger market is more oligopolistic than monopolistically competitive.True

In long-run equilibrium in monopolistic competition:

In order to maximize profits, a firm in monopolistic competition will likely produce:

Advertising is an economically productive activity and not a waste of resources because:

First Principles

Economic Models: Trade-Offs and Trade

Supply and Demand

Consumer and Producer Surplus

Price Controls and Quotas: Meddling With Markets

Elasticity

Taxes

International Trade

Decision Making by Individuals and Firms

The Rational Consumer

Behind the Supply Curve: Inputs and Costs

Perfect Competition and the Supply Curve

Monopoly

Oligopoly

Externalities

Public Goods and Common Resources

The Economics of the Welfare State

Factor Markets and the Distribution of Income

Uncertainty, Risk, and Private Information

Filters

Exam 15: Monopolistic Competition and Product Differentiation

Consumers' differing tastes are one reason why monopolistic:

In long-run equilibrium in perfect competition:

A monopolistically competitive industry, such as corn snack chips, and a perfectly competitive industry, like wheat farming, are alike in that:

Toby operates a small deli downtown.The deli industry is monopolistically competitive.Toby tells you he is producing the quantity that minimizes his average total cost.Assuming that Toby is maximizing profits, you know Toby's:

The price in a long-run equilibrium for a monopolistically competitive firm is __________and output is , compared to that of a perfectly competitive firm with an identical production function and cost curves.

In the long run, perfect competitors and monopolistic competitors are similar in that they:

If a monopolistically competitive firm is in long-run equilibrium, then price _.

Which of the following statements is correct?

Figure: Profits in Monopolistic Competition (Figure: Profits in Monopolistic Competition) Look at the figure Profits in Monopolistic Competition.A negative economic profit (or economic loss) is earned if the profit-maximizing price is ________ in panel _.

Since a monopolistic competitor charges a price greater than marginal cost, there is a deadweight loss associated with monopolistic competition.False

In the long run, monopolistic competitors will:

Which of the following is true of firms in both perfect competition and monopolistic competition?

The conditions for profit maximization and the analysis of short-run equilibrium are identical for monopoly and for a monopolistically competitive firm.False

In the market for hamburgers, there is some differentiation and many firms offering hamburgers.This would suggest that the hamburger market is more oligopolistic than monopolistically competitive.True

In long-run equilibrium in monopolistic competition:

In order to maximize profits, a firm in monopolistic competition will likely produce:

Advertising is an economically productive activity and not a waste of resources because:

First Principles

Economic Models: Trade-Offs and Trade

Supply and Demand

Consumer and Producer Surplus

Price Controls and Quotas: Meddling With Markets

Elasticity

Taxes

International Trade

Decision Making by Individuals and Firms

The Rational Consumer

Behind the Supply Curve: Inputs and Costs

Perfect Competition and the Supply Curve

Monopoly

Oligopoly

Externalities

Public Goods and Common Resources

The Economics of the Welfare State

Factor Markets and the Distribution of Income

Uncertainty, Risk, and Private Information

Filters