Question 1

Toby operates a small deli downtown. The deli industry is monopolistically competitive. In the long run, Toby will produce where:

Accepted Answer

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

Question 2

Because most communities have a large number of similar but not identical substitutes, the market for financial planners is best considered to be:

Accepted Answer

A)  a monopoly. 
B)  an oligopoly. 
C)  perfect competition. 
D)  monopolistically competitive. 
A)  a monopoly. 
B)  an oligopoly. 
C)  perfect competition. 
D)  monopolistically competitive.

Question 3

Use the following to answer questions:
Figure: Monopolistic Competition II  
-(Figure: Monopolistic Competition II) Panel _____ in the figure Monopolistic Competition II shows a monopolistic competitor earning a loss in the short run.

Accepted Answer

A)  (a) 
B)  (b) 
C)  (c) 
D)  None of the panels shows a loss in the short run. 
A)  (a) 
B)  (b) 
C)  (c) 
D)  None of the panels shows a loss in the short run.

Question 4

In long-run equilibrium in monopolistic competition, marginal cost is:

Accepted Answer

A)  greater than price. 
B)  equal to price. 
C)  less than price. 
D)  related to price but not in a predictable way. 
A)  greater than price. 
B)  equal to price. 
C)  less than price. 
D)  related to price but not in a predictable way.

Question 5

The failure to produce enough to minimize average total cost is termed:

Accepted Answer

A)  economic profits. 
B)  excess capacity. 
C)  advertising. 
D)  excess production. 
A)  economic profits. 
B)  excess capacity. 
C)  advertising. 
D)  excess production.

Question 6

A monopolistically competitive firm will earn maximum profit if it produces at the lowest possible average total cost.

Accepted Answer

A) True 
 B)False

Question 7

The demand curve for a firm operating in a monopolistically competitive market is best described as:

Accepted Answer

A)  U-shaped. 
B)  upward-sloping. 
C)  downward-sloping. 
D)  horizontal. 
A)  U-shaped. 
B)  upward-sloping. 
C)  downward-sloping. 
D)  horizontal.

Question 8

The demand curve for a firm in monopolistic competition is _____ facing a perfectly competitive firm.

Accepted Answer

A)  downward-sloping, unlike the horizontal demand curve 
B)  horizontal, unlike the downward-sloping demand curve 
C)  horizontal, the same as that 
D)  downward-sloping, the same as that 
A)  downward-sloping, unlike the horizontal demand curve 
B)  horizontal, unlike the downward-sloping demand curve 
C)  horizontal, the same as that 
D)  downward-sloping, the same as that

Question 9

The model of monopolistic competition characterizes a city's market for plumbing services. Suppose that the market is initially in long-run equilibrium, and then demand for plumbing services increases. In the short run, plumbing services' price will _____ and output will _____.

Accepted Answer

A)  fall; fall 
B)  not change; not change 
C)  rise; rise 
D)  rise; fall 
A)  fall; fall 
B)  not change; not change 
C)  rise; rise 
D)  rise; fall

Question 10

Which of the following industries is MOST likely to be monopolistically competitive?

Accepted Answer

A)  automobile production 
B)  fresh bagel shops 
C)  corn farming 
D)  electric utility production 
A)  automobile production 
B)  fresh bagel shops 
C)  corn farming 
D)  electric utility production

Question 11

Which of the following is TRUE?

Accepted Answer

A)  For choosing the profit-maximizing quantity, the short-run decision-making process of a firm in perfect competition is the same as that of a firm in monopolistic competition, since they produce so that P > MC. 
B)  In the long run in perfect competition, economic profits equal zero, and in monopolistic competition in the long run, economic profits are very large. 
C)  In perfect competition, P = MC, and in monopolistic competition, MR = MC, but P > MC and there is excess capacity. 
D)  In both perfect competition and monopolistic competition, P equals minimum average total cost in the long run. 
A)  For choosing the profit-maximizing quantity, the short-run decision-making process of a firm in perfect competition is the same as that of a firm in monopolistic competition, since they produce so that P > MC. 
B)  In the long run in perfect competition, economic profits equal zero, and in monopolistic competition in the long run, economic profits are very large. 
C)  In perfect competition, P = MC, and in monopolistic competition, MR = MC, but P > MC and there is excess capacity. 
D)  In both perfect competition and monopolistic competition, P equals minimum average total cost in the long run.

Question 12

Which of the following describes a feature shared by monopolistic competition and perfect competition?

Accepted Answer

A)  few firms in the industry 
B)  no barriers to entry or exit in the long run 
C)  absolute market power 
D)  standardized products 
A)  few firms in the industry 
B)  no barriers to entry or exit in the long run 
C)  absolute market power 
D)  standardized products

Question 13

Use the following to answer questions:  
-(Table: Spring Water) The table Spring Water shows the demand and cost data for a firm in a monopolistically competitive industry producing drinking water from underground springs. At the profit-maximizing output, profit per unit is:

Accepted Answer

A)  $1.17. 
B)  $8.83. 
C)  $10.00. 
D)  $11.75. 
A)  $1.17. 
B)  $8.83. 
C)  $10.00. 
D)  $11.75.

Question 14

Use the following to answer questions:
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 15

Monopolistic competition shares some characteristics with perfect competition and monopoly. Explain where these market structures are similar and where they differ.

Accepted Answer

Monopolistic competition is similar to p

Question 16

In long-run equilibrium in monopolistic competition:

Accepted Answer

A)  price is greater than average total cost. 
B)  price is equal to average total cost at an output below where average total cost is minimized. 
C)  price is equal to average total cost at its minimum. 
D)  price is equal to average total cost at an output above where average total cost is minimized. 
A)  price is greater than average total cost. 
B)  price is equal to average total cost at an output below where average total cost is minimized. 
C)  price is equal to average total cost at its minimum. 
D)  price is equal to average total cost at an output above where average total cost is minimized.

Question 17

The demand curve for a firm operating in a monopolistically competitive industry is:

Accepted Answer

A)  U-shaped. 
B)  upward-sloping. 
C)  downward-sloping. 
D)  vertical. 
A)  U-shaped. 
B)  upward-sloping. 
C)  downward-sloping. 
D)  vertical.

Question 18

If a firm operating in monopolistic competition is producing a quantity at which _____, then the marginal decision rule tells us that profit _____.

Accepted Answer

A)  MC > MR; can be increased by increasing production 
B)  MC  MR; is maximized 
A)  MC > MR; can be increased by increasing production 
B)  MC  MR; is maximized

Question 19

Use the following to answer questions:
Figure: The Restaurant Market  
-(Figure: The Restaurant Market) The figure The Restaurant Market shows curves facing a typical restaurant. Assume that many firms, differentiated products, and easy entry and exit characterize the restaurant industry. The restaurant shown here will maximize profits at quantity:

Accepted Answer

A)  Q1. 
B)  Q2. 
C)  Q3. 
D)  Not enough information is given to answer the question. 
A)  Q1. 
B)  Q2. 
C)  Q3. 
D)  Not enough information is given to answer the question.

Question 20

A monopolistically competitive firm is operating in the short run at the optimal level of output and is earning positive economic profits. Describe how this industry will adjust in the long run.

Accepted Answer

Short-run profits will attract entry of

Toby operates a small deli downtown. The deli industry is monopolistically competitive. In the long run, Toby will produce where:

Because most communities have a large number of similar but not identical substitutes, the market for financial planners is best considered to be:

Use the following to answer questions: Figure: Monopolistic Competition II -(Figure: Monopolistic Competition II) Panel _____ in the figure Monopolistic Competition II shows a monopolistic competitor earning a loss in the short run.

In long-run equilibrium in monopolistic competition, marginal cost is:

The failure to produce enough to minimize average total cost is termed:

A monopolistically competitive firm will earn maximum profit if it produces at the lowest possible average total cost.

The demand curve for a firm operating in a monopolistically competitive market is best described as:

The demand curve for a firm in monopolistic competition is _____ facing a perfectly competitive firm.

The model of monopolistic competition characterizes a city's market for plumbing services. Suppose that the market is initially in long-run equilibrium, and then demand for plumbing services increases. In the short run, plumbing services' price will _ and output will _.

Which of the following industries is MOST likely to be monopolistically competitive?

Which of the following is TRUE?

Which of the following describes a feature shared by monopolistic competition and perfect competition?

Use the following to answer questions: -(Table: Spring Water) The table Spring Water shows the demand and cost data for a firm in a monopolistically competitive industry producing drinking water from underground springs. At the profit-maximizing output, profit per unit is:

Use the following to answer questions: 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 _.

Monopolistic competition shares some characteristics with perfect competition and monopoly. Explain where these market structures are similar and where they differ.

In long-run equilibrium in monopolistic competition:

The demand curve for a firm operating in a monopolistically competitive industry is:

If a firm operating in monopolistic competition is producing a quantity at which _, then the marginal decision rule tells us that profit _.

A monopolistically competitive firm is operating in the short run at the optimal level of output and is earning positive economic profits. Describe how this industry will adjust in the long run.

First Principles

Economic Models: Trade-Offs and Trade 25

Supply and Demand

Consumer and Producer Surplus

Price Controls and Quotas: Meddling With Markets

Elasticity

Taxes

International Trade

Decision Making by Individuals Firms

The Rational Consumer

Behind the Supply Curve: Inputs and Costs

Perfect Competition and the Supply Curve

Monopoly

Oligopoly

Externalities

Public Goods Common Resources

The Economics of the Welfare

Factor Markets and the Distribution of Income

Uncertainty, Risk, and Private Information

Filters

Exam 15: Monopolistic Competition and Product Differentiation

Toby operates a small deli downtown. The deli industry is monopolistically competitive. In the long run, Toby will produce where:

Because most communities have a large number of similar but not identical substitutes, the market for financial planners is best considered to be:

Use the following to answer questions: Figure: Monopolistic Competition II -(Figure: Monopolistic Competition II) Panel _____ in the figure Monopolistic Competition II shows a monopolistic competitor earning a loss in the short run.

In long-run equilibrium in monopolistic competition, marginal cost is:

The failure to produce enough to minimize average total cost is termed:

A monopolistically competitive firm will earn maximum profit if it produces at the lowest possible average total cost.

The demand curve for a firm operating in a monopolistically competitive market is best described as:

The demand curve for a firm in monopolistic competition is _____ facing a perfectly competitive firm.

The model of monopolistic competition characterizes a city's market for plumbing services. Suppose that the market is initially in long-run equilibrium, and then demand for plumbing services increases. In the short run, plumbing services' price will _____ and output will _____.

Which of the following industries is MOST likely to be monopolistically competitive?

Which of the following is TRUE?

Which of the following describes a feature shared by monopolistic competition and perfect competition?

Use the following to answer questions: -(Table: Spring Water) The table Spring Water shows the demand and cost data for a firm in a monopolistically competitive industry producing drinking water from underground springs. At the profit-maximizing output, profit per unit is:

Use the following to answer questions: 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 _____.

Monopolistic competition shares some characteristics with perfect competition and monopoly. Explain where these market structures are similar and where they differ.

In long-run equilibrium in monopolistic competition:

The demand curve for a firm operating in a monopolistically competitive industry is:

If a firm operating in monopolistic competition is producing a quantity at which _____, then the marginal decision rule tells us that profit _____.

A monopolistically competitive firm is operating in the short run at the optimal level of output and is earning positive economic profits. Describe how this industry will adjust in the long run.

First Principles

Economic Models: Trade-Offs and Trade 25

Supply and Demand

Consumer and Producer Surplus

Price Controls and Quotas: Meddling With Markets

Elasticity

Taxes

International Trade

Decision Making by Individuals Firms

The Rational Consumer

Behind the Supply Curve: Inputs and Costs

Perfect Competition and the Supply Curve

Monopoly

Oligopoly

Externalities

Public Goods Common Resources

The Economics of the Welfare

Factor Markets and the Distribution of Income

Uncertainty, Risk, and Private Information

Filters

The model of monopolistic competition characterizes a city's market for plumbing services. Suppose that the market is initially in long-run equilibrium, and then demand for plumbing services increases. In the short run, plumbing services' price will _ and output will _.

Use the following to answer questions: 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 _.

If a firm operating in monopolistic competition is producing a quantity at which _, then the marginal decision rule tells us that profit _.