Question 1

In long-run equilibrium in perfect 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 2

A firm operating in a monopolistically competitive market is producing a quantity at which MC = MR. Profit:

Accepted Answer

A)  can be increased by increasing production. 
B)  is maximized. 
C)  can be increased by decreasing the price. 
D)  is maximized only if MC = P. 
A)  can be increased by increasing production. 
B)  is maximized. 
C)  can be increased by decreasing the price. 
D)  is maximized only if MC = P.

Question 3

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. The profit-maximizing output is _____ cases.

Accepted Answer

A)  5 
B)  6 
C)  7 
D)  8 
A)  5 
B)  6 
C)  7 
D)  8

Question 4

In the long run, monopolistically competitive firms:

Accepted Answer

A)  produce at the level that minimizes average total cost. 
B)  set marginal revenue equal to price. 
C)  cannot earn an economic profit. 
D)  produce so that marginal cost equals price. 
A)  produce at the level that minimizes average total cost. 
B)  set marginal revenue equal to price. 
C)  cannot earn an economic profit. 
D)  produce so that marginal cost equals price.

Question 5

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 6

Why are some rational consumers willing to pay more for a bottle of Advil than for a bottle of generic ibuprofen tablets, when ibuprofen is the active ingredient in Advil?

Accepted Answer

Advil is a successful brand name that si

Question 7

Monopolistic competition in an industry results in:

Accepted Answer

A)  overutilization of plants. 
B)  chronic excess capacity. 
C)  less advertising than in perfect competition. 
D)  lower prices than in perfect competition. 
A)  overutilization of plants. 
B)  chronic excess capacity. 
C)  less advertising than in perfect competition. 
D)  lower prices than in perfect competition.

Question 8

Use the following to answer questions:
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 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 9

To maximize profit, a monopolistically competitive firm should produce the level of output at which:

Accepted Answer

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

Question 10

An industry with a few interdependent firms is best described as an example of:

Accepted Answer

A)  perfect competition. 
B)  monopolistic competition. 
C)  oligopoly. 
D)  monopoly. 
A)  perfect competition. 
B)  monopolistic competition. 
C)  oligopoly. 
D)  monopoly.

Question 11

The market for soft drinks, which is dominated by Coca Cola and Pepsi, is best considered to be an example of:

Accepted Answer

A)  perfect competition. 
B)  monopolistic competition. 
C)  oligopoly. 
D)  monopoly. 
A)  perfect competition. 
B)  monopolistic competition. 
C)  oligopoly. 
D)  monopoly.

Question 12

In many cities you can stay at a Holiday Inn in the downtown area, in a suburban community, or near the airport. These Holiday Inn establishments are examples of product differentiation by:

Accepted Answer

A)  type. 
B)  location. 
C)  quality. 
D)  style. 
A)  type. 
B)  location. 
C)  quality. 
D)  style.

Question 13

Use the following to answer questions:
Figure: Profit Maximization in Monopolistic Competition  
-(Figure: Profit Maximization in Monopolistic Competition) Look at the figure Profit Maximization in Monopolistic Competition. A firm in monopolistic competition will maximize profits by producing so that:

Accepted Answer

A)  P = MC. 
B)  MR = MC. 
C)  P = MR. 
D)  P - ATC (i.e., economic profit per unit) is the largest. 
A)  P = MC. 
B)  MR = MC. 
C)  P = MR. 
D)  P - ATC (i.e., economic profit per unit) is the largest.

Question 14

Those who are critical of advertising argue that it:

Accepted Answer

A)  tends to make markets behave more like perfectly competitive markets. 
B)  leads to a shortage of high-cost, high-quality goods. 
C)  results in higher prices to consumers. 
D)  encourages competition through price comparison. 
A)  tends to make markets behave more like perfectly competitive markets. 
B)  leads to a shortage of high-cost, high-quality goods. 
C)  results in higher prices to consumers. 
D)  encourages competition through price comparison.

Question 15

As product differentiation increases, the price elasticity of demand falls and the firm increases its market power.

Accepted Answer

A) True 
 B)False

Question 16

Use the following to answer questions:
Figure: Firms in Monopolistic Competition  
-(Figure: Firms in Monopolistic Competition) In panel (C) of the figure Firms in Monopolistic Competition, the profit-maximizing quantity of output is determined by the intersection at point:

Accepted Answer

A)  U. 
B)  V. 
C)  W. 
D)  X. 
A)  U. 
B)  V. 
C)  W. 
D)  X.

Question 17

Firms in monopolistic competition can acquire some market power by:

Accepted Answer

A)  using price competition. 
B)  engaging in tacit collusion. 
C)  differentiating the product. 
D)  increasing their output to the perfectly competitive level. 
A)  using price competition. 
B)  engaging in tacit collusion. 
C)  differentiating the product. 
D)  increasing their output to the perfectly competitive level.

Question 18

Monopolistic competition describes an industry characterized by:

Accepted Answer

A)  a product with many close substitutes. 
B)  a horizontal demand curve. 
C)  a small number of firms. 
D)  barriers to entry and exit. 
A)  a product with many close substitutes. 
B)  a horizontal demand curve. 
C)  a small number of firms. 
D)  barriers to entry and exit.

Question 19

Use the following to answer questions:
Figure: Monopolistic Competition V  
-(Figure: Monopolistic Competition V) The figure Monopolistic Competition V illustrates a firm in the _____; in the _____, the demand and marginal revenue curves will shift to the _____.

Accepted Answer

A)  short run; long run; right 
B)  long run; short run; left 
C)  short run; long run; left 
D)  long run; short run; right 
A)  short run; long run; right 
B)  long run; short run; left 
C)  short run; long run; left 
D)  long run; short run; right

Question 20

In a long-run equilibrium, firms in a monopolistically competitive industry sell at a price:

Accepted Answer

A)  equal to marginal cost. 
B)  less than marginal cost. 
C)  greater than marginal cost. 
D)  less than marginal revenue. 
A)  equal to marginal cost. 
B)  less than marginal cost. 
C)  greater than marginal cost. 
D)  less than marginal revenue.

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

A firm operating in a monopolistically competitive market is producing a quantity at which MC = MR. Profit:

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. The profit-maximizing output is _____ cases.

In the long run, monopolistically competitive firms:

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

Why are some rational consumers willing to pay more for a bottle of Advil than for a bottle of generic ibuprofen tablets, when ibuprofen is the active ingredient in Advil?

Monopolistic competition in an industry results in:

To maximize profit, a monopolistically competitive firm should produce the level of output at which:

An industry with a few interdependent firms is best described as an example of:

The market for soft drinks, which is dominated by Coca Cola and Pepsi, is best considered to be an example of:

In many cities you can stay at a Holiday Inn in the downtown area, in a suburban community, or near the airport. These Holiday Inn establishments are examples of product differentiation by:

Use the following to answer questions: Figure: Profit Maximization in Monopolistic Competition -(Figure: Profit Maximization in Monopolistic Competition) Look at the figure Profit Maximization in Monopolistic Competition. A firm in monopolistic competition will maximize profits by producing so that:

Those who are critical of advertising argue that it:

As product differentiation increases, the price elasticity of demand falls and the firm increases its market power.

Use the following to answer questions: Figure: Firms in Monopolistic Competition -(Figure: Firms in Monopolistic Competition) In panel (C) of the figure Firms in Monopolistic Competition, the profit-maximizing quantity of output is determined by the intersection at point:

Firms in monopolistic competition can acquire some market power by:

Monopolistic competition describes an industry characterized by:

Use the following to answer questions: Figure: Monopolistic Competition V -(Figure: Monopolistic Competition V) The figure Monopolistic Competition V illustrates a firm in the ___; in the _, the demand and marginal revenue curves will shift to the ___.

In a long-run equilibrium, firms in a monopolistically competitive industry sell at a price:

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

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

A firm operating in a monopolistically competitive market is producing a quantity at which MC = MR. Profit:

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. The profit-maximizing output is _____ cases.

In the long run, monopolistically competitive firms:

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

Why are some rational consumers willing to pay more for a bottle of Advil than for a bottle of generic ibuprofen tablets, when ibuprofen is the active ingredient in Advil?

Monopolistic competition in an industry results in:

To maximize profit, a monopolistically competitive firm should produce the level of output at which:

An industry with a few interdependent firms is best described as an example of:

The market for soft drinks, which is dominated by Coca Cola and Pepsi, is best considered to be an example of:

In many cities you can stay at a Holiday Inn in the downtown area, in a suburban community, or near the airport. These Holiday Inn establishments are examples of product differentiation by:

Those who are critical of advertising argue that it:

As product differentiation increases, the price elasticity of demand falls and the firm increases its market power.

Use the following to answer questions: Figure: Firms in Monopolistic Competition -(Figure: Firms in Monopolistic Competition) In panel (C) of the figure Firms in Monopolistic Competition, the profit-maximizing quantity of output is determined by the intersection at point:

Firms in monopolistic competition can acquire some market power by:

Monopolistic competition describes an industry characterized by:

Use the following to answer questions: Figure: Monopolistic Competition V -(Figure: Monopolistic Competition V) The figure Monopolistic Competition V illustrates a firm in the _____; in the _____, the demand and marginal revenue curves will shift to the _____.

In a long-run equilibrium, firms in a monopolistically competitive industry sell at a price:

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

Use the following to answer questions: Figure: Monopolistic Competition V -(Figure: Monopolistic Competition V) The figure Monopolistic Competition V illustrates a firm in the ___; in the _, the demand and marginal revenue curves will shift to the ___.