Question 1

Long-run equilibrium in perfect competition and in monopolistic competition are similar because in both models, firms:

Accepted Answer

A)  produce at the minimum point of the average total cost curve. 
B)  set price equal to marginal cost. 
C)  make zero economic profits. 
D)  have excess capacity. 
A)  produce at the minimum point of the average total cost curve. 
B)  set price equal to marginal cost. 
C)  make zero economic profits. 
D)  have excess capacity.

Question 2

The model of monopolistic competition characterizes the market for plumbing services. This market is initially in long-run equilibrium, but then there is an increase in the market demand for plumbing services. We expect that in the long run, the economic profits of typical firms will be:

Accepted Answer

A)  typical of those earned by monopoly firms. 
B)  negative. 
C)  zero. 
D)  positive but less than the level typically earned by monopoly firms. 
A)  typical of those earned by monopoly firms. 
B)  negative. 
C)  zero. 
D)  positive but less than the level typically earned by monopoly firms.

Question 3

A brand name is owned by a particular firm, and it distinguishes that firm's products from those of its competitors.

Accepted Answer

A) True 
 B)False

Question 4

Use the following to answer questions:
Figure: Firms in Monopolistic Competition  
-(Figure: Firms in Monopolistic Competition) In panel (A) of the figure Firms in Monopolistic Competition, economic profit per unit is:

Accepted Answer

A)  KL. 
B)  LO. 
C)  MN. 
D)  NO. 
A)  KL. 
B)  LO. 
C)  MN. 
D)  NO.

Question 5

Use the following to answer question:
Figure: Possible Long-Run Outcome  
-(Figure: Possible Long-Run Outcome) In the figure Possible Long-Run Outcome, which price and quantity refer to a potential long-run profit maximizing outcome for a firm producing in a monopolistically competitive market?

Accepted Answer

A)  P1 and Q3 
B)  P1 and Q1 
C)  P2 and Q2 
D)  P1 and Q4 
A)  P1 and Q3 
B)  P1 and Q1 
C)  P2 and Q2 
D)  P1 and Q4

Question 6

An industry characterized by many firms producing similar but differentiated products in a market with easy entry and exit is called:

Accepted Answer

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

Question 7

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 8

If a monopolistically competitive firm is producing the profit-maximizing level of output and is earning an economic profit in the short run:

Accepted Answer

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

Question 9

Use the following to answer questions:
Figure: Profit Maximization in Monopolistic Competition  
-(Figure: Profit Maximization in Monopolistic Competition) In panel (A) of the figure Profit Maximization in Monopolistic Competition, the profit-maximizing price and quantity are _____ and _____.

Accepted Answer

A)  S; M 
B)  P; M 
C)  P; Q 
D)  T; Q 
A)  S; M 
B)  P; M 
C)  P; Q 
D)  T; Q

Question 10

The market for dentists in most communities can be considered _____ because the market has a large number of similar but not identical dental services.

Accepted Answer

A)  monopolistic competition 
B)  a monopoly 
C)  perfect competition 
D)  an oligopoly 
A)  monopolistic competition 
B)  a monopoly 
C)  perfect competition 
D)  an oligopoly

Question 11

Monopolistic competition is an industry structure characterized by:

Accepted Answer

A)  a product with no close substitutes. 
B)  a horizontal demand curve. 
C)  a large number of firms. 
D)  barriers to entry and exit. 
A)  a product with no close substitutes. 
B)  a horizontal demand curve. 
C)  a large number of firms. 
D)  barriers to entry and exit.

Question 12

Product differentiation under monopolistic competition means that each firm:

Accepted Answer

A)  charges the same price. 
B)  maximizes profit where MC = P. 
C)  faces a downward-sloping demand curve. 
D)  always receives economic profits. 
A)  charges the same price. 
B)  maximizes profit where MC = P. 
C)  faces a downward-sloping demand curve. 
D)  always receives economic profits.

Question 13

In monopolistic competition, the primary source of product differentiation is price competition.

Accepted Answer

A) True 
 B)False

Question 14

Monopolistic competition is unique among the four market structures in that it is the only one that is always characterized by product differentiation.

Accepted Answer

A) True 
 B)False

Question 15

A common example of monopolistic competition is the market for:

Accepted Answer

A)  oranges. 
B)  1-inch nails. 
C)  automobiles. 
D)  gas stations. 
A)  oranges. 
B)  1-inch nails. 
C)  automobiles. 
D)  gas stations.

Question 16

The model of monopolistic competition characterizes the market for plumbing services in a city. This market is initially in long-run equilibrium, but then there is an increase in market demand for plumbing services. We expect that in the long run:

Accepted Answer

A)  firms will leave the plumbing market. 
B)  there will be a short-run increase in the number of firms, but then the number will return to the original level. 
C)  new firms will enter the plumbing market. 
D)  firms will shut down, but they will not leave the industry. 
A)  firms will leave the plumbing market. 
B)  there will be a short-run increase in the number of firms, but then the number will return to the original level. 
C)  new firms will enter the plumbing market. 
D)  firms will shut down, but they will not leave the industry.

Question 17

Which of the following is NOT a source of product differentiation?

Accepted Answer

A)  price 
B)  location 
C)  style 
D)  quality 
A)  price 
B)  location 
C)  style 
D)  quality

Question 18

Some economists think that advertising is a waste of resources because:

Accepted Answer

A)  rational consumers end up spending too little on brand names. 
B)  consumers may buy things they do not need. 
C)  advertising creates excess capacity. 
D)  advertising leads to lower costs for goods and services. 
A)  rational consumers end up spending too little on brand names. 
B)  consumers may buy things they do not need. 
C)  advertising creates excess capacity. 
D)  advertising leads to lower costs for goods and services.

Question 19

Monopolistic competition is different from monopoly because firms:

Accepted Answer

A)  have some power to set prices. 
B)  have a downward-sloping demand curve. 
C)  face some competition. 
D)  have a downward-sloping marginal revenue curve. 
A)  have some power to set prices. 
B)  have a downward-sloping demand curve. 
C)  face some competition. 
D)  have a downward-sloping marginal revenue curve.

Question 20

The problem of wasteful duplication in monopolistic competition is due to:

Accepted Answer

A)  excess capacity. 
B)  a lack of physical and human capital. 
C)  barriers to entry. 
D)  the lack of close substitutes for products produced by monopolistically competitive firms. 
A)  excess capacity. 
B)  a lack of physical and human capital. 
C)  barriers to entry. 
D)  the lack of close substitutes for products produced by monopolistically competitive firms.

Long-run equilibrium in perfect competition and in monopolistic competition are similar because in both models, firms:

The model of monopolistic competition characterizes the market for plumbing services. This market is initially in long-run equilibrium, but then there is an increase in the market demand for plumbing services. We expect that in the long run, the economic profits of typical firms will be:

A brand name is owned by a particular firm, and it distinguishes that firm's products from those of its competitors.

Use the following to answer questions: Figure: Firms in Monopolistic Competition -(Figure: Firms in Monopolistic Competition) In panel (A) of the figure Firms in Monopolistic Competition, economic profit per unit is:

Use the following to answer question: Figure: Possible Long-Run Outcome -(Figure: Possible Long-Run Outcome) In the figure Possible Long-Run Outcome, which price and quantity refer to a potential long-run profit maximizing outcome for a firm producing in a monopolistically competitive market?

An industry characterized by many firms producing similar but differentiated products in a market with easy entry and exit is called:

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

If a monopolistically competitive firm is producing the profit-maximizing level of output and is earning an economic profit in the short run:

Use the following to answer questions: Figure: Profit Maximization in Monopolistic Competition -(Figure: Profit Maximization in Monopolistic Competition) In panel (A) of the figure Profit Maximization in Monopolistic Competition, the profit-maximizing price and quantity are _ and _.

The market for dentists in most communities can be considered _____ because the market has a large number of similar but not identical dental services.

Monopolistic competition is an industry structure characterized by:

Product differentiation under monopolistic competition means that each firm:

In monopolistic competition, the primary source of product differentiation is price competition.

Monopolistic competition is unique among the four market structures in that it is the only one that is always characterized by product differentiation.

A common example of monopolistic competition is the market for:

The model of monopolistic competition characterizes the market for plumbing services in a city. This market is initially in long-run equilibrium, but then there is an increase in market demand for plumbing services. We expect that in the long run:

Which of the following is NOT a source of product differentiation?

Some economists think that advertising is a waste of resources because:

Monopolistic competition is different from monopoly because firms:

The problem of wasteful duplication in monopolistic competition is due to:

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

Long-run equilibrium in perfect competition and in monopolistic competition are similar because in both models, firms:

The model of monopolistic competition characterizes the market for plumbing services. This market is initially in long-run equilibrium, but then there is an increase in the market demand for plumbing services. We expect that in the long run, the economic profits of typical firms will be:

A brand name is owned by a particular firm, and it distinguishes that firm's products from those of its competitors.

Use the following to answer questions: Figure: Firms in Monopolistic Competition -(Figure: Firms in Monopolistic Competition) In panel (A) of the figure Firms in Monopolistic Competition, economic profit per unit is:

Use the following to answer question: Figure: Possible Long-Run Outcome -(Figure: Possible Long-Run Outcome) In the figure Possible Long-Run Outcome, which price and quantity refer to a potential long-run profit maximizing outcome for a firm producing in a monopolistically competitive market?

An industry characterized by many firms producing similar but differentiated products in a market with easy entry and exit is called:

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

If a monopolistically competitive firm is producing the profit-maximizing level of output and is earning an economic profit in the short run:

Use the following to answer questions: Figure: Profit Maximization in Monopolistic Competition -(Figure: Profit Maximization in Monopolistic Competition) In panel (A) of the figure Profit Maximization in Monopolistic Competition, the profit-maximizing price and quantity are _____ and _____.

The market for dentists in most communities can be considered _____ because the market has a large number of similar but not identical dental services.

Monopolistic competition is an industry structure characterized by:

Product differentiation under monopolistic competition means that each firm:

In monopolistic competition, the primary source of product differentiation is price competition.

Monopolistic competition is unique among the four market structures in that it is the only one that is always characterized by product differentiation.

A common example of monopolistic competition is the market for:

The model of monopolistic competition characterizes the market for plumbing services in a city. This market is initially in long-run equilibrium, but then there is an increase in market demand for plumbing services. We expect that in the long run:

Which of the following is NOT a source of product differentiation?

Some economists think that advertising is a waste of resources because:

Monopolistic competition is different from monopoly because firms:

The problem of wasteful duplication in monopolistic competition is due to:

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: Profit Maximization in Monopolistic Competition -(Figure: Profit Maximization in Monopolistic Competition) In panel (A) of the figure Profit Maximization in Monopolistic Competition, the profit-maximizing price and quantity are _ and _.