Question 1

All of the following are examples of product differentiation except one.Which is the exception?

Accepted Answer

A) developing a new video game or a computer program called "How to Teach Your New Dog Old
Tricks" 
B) manufacturing a car that minimizes outside noise relative to other cars 
C) lowering the price of a good in a special sale 
D) providing movies and special meals on airline flights 
E) making sodium­free, caffeine­free colas 
A) developing a new video game or a computer program called "How to Teach Your New Dog Old
Tricks" 
B) manufacturing a car that minimizes outside noise relative to other cars 
C) lowering the price of a good in a special sale 
D) providing movies and special meals on airline flights 
E) making sodium­free, caffeine­free colas C

Question 2

)   In Exhibit 10­10, what is the maximum profit this monopolistic competitorcan earn in the long run?

Accepted Answer

A) $40 
B) $4 
C) $48 
D) $8 
E) $0 
A) $40 
B) $4 
C) $48 
D) $8 
E) $0 E

Question 3

Which of the following is most likely produced in a monopolisticallycompetitive market?

Accepted Answer

A) restaurant meals 
B) computer chips 
C) firewood 
D) motorcycles 
E) soft drink 
A) restaurant meals 
B) computer chips 
C) firewood 
D) motorcycles 
E) soft drink A

Question 4

Which of the following describes the relationship among market price (P),average revenue (AR), and marginal revenue (MR) for a firm inmonopolistic competition.

Accepted Answer

A) P = AR = MR B) P > AR = MR C) P = AR > MR D) P > AR > MR E) P = AR < MR A) P = AR = MR B) P > AR = MR C) P = AR > MR D) P > AR > MR E) P = AR < MR

Question 5

If Family Travel Agency, a monopolistic competitor, offers services thatare differentiated from the services of other producers in the industry, it

Accepted Answer

A) faces a perfectly elastic demand curve 
B) is a price taker 
C) has some power to control the price it charges 
D) faces a perfectly inelastic demand curve 
E) produces a product with no close substitutes 
A) faces a perfectly elastic demand curve 
B) is a price taker 
C) has some power to control the price it charges 
D) faces a perfectly inelastic demand curve 
E) produces a product with no close substitutes

Question 6

At the profit­maximizing output, the monopolistically competitive firm inExhibit 10­3 is in

Accepted Answer

A) long­run equilibrium because price equals average total cost 
B) long­run equilibrium because price is less than average total cost 
C) short­run equilibrium because price is greater than average total cost 
D) short­run equilibrium because there is an economic loss 
E) short­run equilibrium because there is zero economic profit 
A) long­run equilibrium because price equals average total cost 
B) long­run equilibrium because price is less than average total cost 
C) short­run equilibrium because price is greater than average total cost 
D) short­run equilibrium because there is an economic loss 
E) short­run equilibrium because there is zero economic profit

Question 7

)   At the profit­maximizing output level, total cost for the firm in Exhibit 10­7is approximately

Accepted Answer

A) $5,700 
B) $5,320 
C) $4,750 
D) $4,940 
E) $8,100 
A) $5,700 
B) $5,320 
C) $4,750 
D) $4,940 
E) $8,100

Question 8

)   Consider Exhibit 10­2.If the firm is charging price P* for output q*, then inorder to minimize loss in the short run, the firm should

Accepted Answer

A) shut down because price is greater than average variable cost 
B) shut down because price is greater than marginal cost 
C) shut down because price is less than average variable cost 
D) continue to produce because price is greater than average variable cost 
E) continue to produce because price is greater than marginal cost 
A) shut down because price is greater than average variable cost 
B) shut down because price is greater than marginal cost 
C) shut down because price is less than average variable cost 
D) continue to produce because price is greater than average variable cost 
E) continue to produce because price is greater than marginal cost

Question 9

In the long run, Bubba's Baby Boutique, a monopolistically competitivefirm,

Accepted Answer

A) earns zero normal profit but positive economic profit 
B) earns normal profit but zero economic profit 
C) earns normal and economic profit 
D) earns zero normal and economic profit 
E) might earn any level of economic profit; no level is guaranteed 
A) earns zero normal profit but positive economic profit 
B) earns normal profit but zero economic profit 
C) earns normal and economic profit 
D) earns zero normal and economic profit 
E) might earn any level of economic profit; no level is guaranteed

Question 10

In Exhibit 10­1, the monopolistic competitor's profit­maximizing level ofoutput is

Accepted Answer

A) 75 units 
B) 100 units 
C) 125 units 
D) 150 units 
E) 137.5 units 
A) 75 units 
B) 100 units 
C) 125 units 
D) 150 units 
E) 137.5 units

Question 11

)     At the profit­maximizing output, the firm in Exhibit 10­3 is earning

Accepted Answer

A) an economic profit of $38 
B) an economic profit, but the amount cannot be determined 
C) zero economic profit 
D) an economic profit of $32 
E) an economic loss 
A) an economic profit of $38 
B) an economic profit, but the amount cannot be determined 
C) zero economic profit 
D) an economic profit of $32 
E) an economic loss

Question 12

Assume that the firm in Exhibit 10­11 maximizes profit.Its total revenue is

Accepted Answer

A) $5,200 
B) $4,000 
C) $3,600 
D) $5,600 
E) $3,200 
A) $5,200 
B) $4,000 
C) $3,600 
D) $5,600 
E) $3,200

Question 13

In the short run, which of the following should the firm in Exhibit 10­4 do?

Accepted Answer

A) Produce 10 units at a price of $36 per unit. 
B) Produce 10 units at a price of $24 per unit. 
C) Produce 10 units at a price of $40 per unit. 
D) Produce 15 units at a price of $32 per unit. 
E) We cannot determine what the firm should do without knowing its average variable cost. 
A) Produce 10 units at a price of $36 per unit. 
B) Produce 10 units at a price of $24 per unit. 
C) Produce 10 units at a price of $40 per unit. 
D) Produce 15 units at a price of $32 per unit. 
E) We cannot determine what the firm should do without knowing its average variable cost.

Question 14

If a monopolistically competitive firm raises its price, it

Accepted Answer

A) loses all of its customers (sales drop to zero) 
B) loses some, but not all, of its customers 
C) loses very few customers 
D) loses no customers at all 
E) gains customers (sales increase) 
A) loses all of its customers (sales drop to zero) 
B) loses some, but not all, of its customers 
C) loses very few customers 
D) loses no customers at all 
E) gains customers (sales increase)

Question 15

A monopolistically competitive firm is producing an output level at whichmarginal revenue is greater than marginal cost.This firm should__________ quantity and __________ price to increase profit or reducelosses.

Accepted Answer

A) increase, increase 
B) increase; decrease 
C) decrease; increase 
D) decrease; decrease 
E) increase; not change 
A) increase, increase 
B) increase; decrease 
C) decrease; increase 
D) decrease; decrease 
E) increase; not change

Question 16

Monopolistic competition is best described as

Accepted Answer

A) many firms with some control over price, and some product differentiation 
B) many firms with no control over price, producing identical products 
C) a few firms with some control over price, producing highly differentiated products 
D) a few firms with no control over price, producing similar products 
E) a single firm producing all of the output for the industry, with strong control over price 
A) many firms with some control over price, and some product differentiation 
B) many firms with no control over price, producing identical products 
C) a few firms with some control over price, producing highly differentiated products 
D) a few firms with no control over price, producing similar products 
E) a single firm producing all of the output for the industry, with strong control over price

Question 17

Firms may easily enter a monopolistically competitive market.

Accepted Answer

A) True 
 B)False

Question 18

)   If the firm in Exhibit 10­9 produces 100 units of output, it will have

Accepted Answer

A) both d and e 
B) variable cost of slightly less than $800 
C) fixed cost of slightly more than $700 
D) total cost of $1,500 
E) total revenue of $800 
A) both d and e 
B) variable cost of slightly less than $800 
C) fixed cost of slightly more than $700 
D) total cost of $1,500 
E) total revenue of $800

Question 19

In order to maximize profit or minimize loss, the firm in Exhibit 10­9 should

Accepted Answer

A) produce 100 units of output and charge $15 
B) produce 100 units of output and charge $8 
C) produce more than 100 units of output and charge less than $8 
D) produce slightly less than 100 units of output and charge more than $8 
E) shut down 
A) produce 100 units of output and charge $15 
B) produce 100 units of output and charge $8 
C) produce more than 100 units of output and charge less than $8 
D) produce slightly less than 100 units of output and charge more than $8 
E) shut down

Question 20

In the short run, the firm in Exhibit 10­5 should

Accepted Answer

A) shut down 
B) produce 8 units at a price of $11 per unit 
C) produce 8 units at a price of $10 per unit 
D) produce 8 units at a price of $9 per unit 
E) produce 10 units at a price of $9 per unit 
A) shut down 
B) produce 8 units at a price of $11 per unit 
C) produce 8 units at a price of $10 per unit 
D) produce 8 units at a price of $9 per unit 
E) produce 10 units at a price of $9 per unit

Exam 10: Monopolistic Competition and Oligopoly

All of the following are examples of product differentiation except one.Which is the exception?

) In Exhibit 10­10, what is the maximum profit this monopolistic competitorcan earn in the long run?

Which of the following is most likely produced in a monopolisticallycompetitive market?

Which of the following describes the relationship among market price (P),average revenue (AR), and marginal revenue (MR) for a firm inmonopolistic competition.

If Family Travel Agency, a monopolistic competitor, offers services thatare differentiated from the services of other producers in the industry, it

At the profit­maximizing output, the monopolistically competitive firm inExhibit 10­3 is in

) At the profit­maximizing output level, total cost for the firm in Exhibit 10­7is approximately

) Consider Exhibit 10­2.If the firm is charging price P* for output q*, then inorder to minimize loss in the short run, the firm should

In the long run, Bubba's Baby Boutique, a monopolistically competitivefirm,

In Exhibit 10­1, the monopolistic competitor's profit­maximizing level ofoutput is

) At the profit­maximizing output, the firm in Exhibit 10­3 is earning

Assume that the firm in Exhibit 10­11 maximizes profit.Its total revenue is

In the short run, which of the following should the firm in Exhibit 10­4 do?

If a monopolistically competitive firm raises its price, it

A monopolistically competitive firm is producing an output level at whichmarginal revenue is greater than marginal cost.This firm should__________ quantity and __________ price to increase profit or reducelosses.

Monopolistic competition is best described as

Firms may easily enter a monopolistically competitive market.

) If the firm in Exhibit 10­9 produces 100 units of output, it will have

In order to maximize profit or minimize loss, the firm in Exhibit 10­9 should

In the short run, the firm in Exhibit 10­5 should

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Filters

) In Exhibit 1010, what is the maximum profit this monopolistic competitorcan earn in the long run?

At the profitmaximizing output, the monopolistically competitive firm inExhibit 103 is in

) At the profitmaximizing output level, total cost for the firm in Exhibit 107is approximately

) Consider Exhibit 102.If the firm is charging price P* for output q*, then inorder to minimize loss in the short run, the firm should

In Exhibit 101, the monopolistic competitor's profitmaximizing level ofoutput is

) At the profitmaximizing output, the firm in Exhibit 103 is earning

Assume that the firm in Exhibit 1011 maximizes profit.Its total revenue is

In the short run, which of the following should the firm in Exhibit 104 do?

A monopolistically competitive firm is producing an output level at whichmarginal revenue is greater than marginal cost.This firm should quantity and price to increase profit or reducelosses.

) If the firm in Exhibit 109 produces 100 units of output, it will have

In order to maximize profit or minimize loss, the firm in Exhibit 109 should

In the short run, the firm in Exhibit 105 should