Question 1

For a monopolistically competitive firm, marginal revenue

Accepted Answer

A) equals the price. 
B) is greater than the price. 
C) is less than the price. 
D) and price are unrelated. 
A) equals the price. 
B) is greater than the price. 
C) is less than the price. 
D) and price are unrelated. C

Question 2

Is a monopolistically competitive firm allocatively efficient?

Accepted Answer

A) No, because it does not produce at minimum average total cost. 
B) Yes, because it produces where marginal cost equals marginal revenue. 
C) No, because price is greater than marginal cost. 
D) Yes, because price equals average total cost. 
A) No, because it does not produce at minimum average total cost. 
B) Yes, because it produces where marginal cost equals marginal revenue. 
C) No, because price is greater than marginal cost. 
D) Yes, because price equals average total cost. C

Question 3

Figure 11.6
  
-Refer to Figure 11.6.What is the monopolistic competitor's profit maximizing output?

Accepted Answer

A) Q₁ units 
B) Q₂ units 
C) Q₃ units 
D) Q₄ units 
A) Q₁ units 
B) Q₂ units 
C) Q₃ units 
D) Q₄ units B

Question 4

How does the long run equilibrium of a monopolistically competitive industry differ from that of a perfectly competitive industry?

Accepted Answer

A) A firm in monopolistic competition will earn economic profits but a firm in perfect competition earns zero profit. 
B) A firm in monopolistic competition will charge a price higher than the average cost of production but a firm in perfect competition charges a price equal to the average cost of production. 
C) A firm in monopolistic competition does not take full advantage of its economies of scale but a firm in perfect competition produces at the lowest average cost possible. 
D) A firm in monopolistic competition produces an allocatively efficient output level while a firm in perfect competition produces a productively efficient output level. 
A) A firm in monopolistic competition will earn economic profits but a firm in perfect competition earns zero profit. 
B) A firm in monopolistic competition will charge a price higher than the average cost of production but a firm in perfect competition charges a price equal to the average cost of production. 
C) A firm in monopolistic competition does not take full advantage of its economies of scale but a firm in perfect competition produces at the lowest average cost possible. 
D) A firm in monopolistic competition produces an allocatively efficient output level while a firm in perfect competition produces a productively efficient output level.

Question 5

A successful trademark is one that becomes a generic name for a product, for example, "Kleenex" has become a generic term for tissues.

Accepted Answer

A) True 
 B)False

Question 6

If the demand curve for a firm is downward-sloping, its marginal revenue curve

Accepted Answer

A) will lie above the demand curve. 
B) will lie below the demand curve. 
C) is the same as the demand curve. 
D) is horizontal. 
A) will lie above the demand curve. 
B) will lie below the demand curve. 
C) is the same as the demand curve. 
D) is horizontal.

Question 7

In monopolistic competition there is/are

Accepted Answer

A) many sellers who each face a downward-sloping demand curve. 
B) a few sellers who each face a downward-sloping demand curve. 
C) only one seller who faces a downward-sloping demand curve. 
D) many sellers who each face a perfectly elastic demand curve. 
A) many sellers who each face a downward-sloping demand curve. 
B) a few sellers who each face a downward-sloping demand curve. 
C) only one seller who faces a downward-sloping demand curve. 
D) many sellers who each face a perfectly elastic demand curve.

Question 8

Figure 11.3
   
Figure 11.3 shows short-run cost and demand curves for a monopolistically competitive firm in the market for designer watches.
-Refer to Figure 11.3.What is the area that represents the total revenue made by the firm?

Accepted Answer

A) 0P₀aQₐ 
B) 0P₁bQₐ 
C) 0P₂cQₐ 
D) 0P₃dQₐ 
A) 0P₀aQₐ 
B) 0P₁bQₐ 
C) 0P₂cQₐ 
D) 0P₃dQₐ

Question 9

Unique to New Brunswick, Beausoleil oysters are known for their perfect, petite shells and are described by Rowan Jacobsen's Geography of Oysters as "ideal starter oysters, with the delightful yeasty aroma of Champagne or rising bread dough." Suppose the following table represents cost and revenue data for a New Brunswick oyster concern.
 \(\begin{array}{|c|c|c|c|c|c|c|c|}
\hline \begin{array}{c}
\text { Dozen } \
\text { Oysters Sold } \
\text { per Day }
\end{array} & \begin{array}{c}
\text { Price } \
(P)
\end{array} & \begin{array}{c}
\text { Total } \
\text { Revenue } \
(T R)
\end{array} & \begin{array}{c}
\text { Marginal } \
\text { Revenue } \
(M R)
\end{array} & \begin{array}{c}
\text { Total Cost } \
(T C)
\end{array} & \begin{array}{c}
\text { Marginal } \
\text { Cost }(M C)
\end{array} & \begin{array}{c}
\text { Total Cost } \
(\boldsymbol{A C C )}
\end{array} & \text { Profit } \
\hline 0 & \$ 15 & \$ 0 & \cdots & \$ 12 & \ldots & \ldots & -\$ 12 \
\hline 1 & 14 & 14 & \$ 14 & 18 & \$ 6 & \$ 18.00 & -4 \
\hline 2 & 13 & 26 & 12 & 20 & 2 & 10.00 & 6 \
\hline 3 & 12 & 36 & 10 & 21 & 1 & 7.00 & 15 \
\hline 4 & 11 & 44 & 8 & 23 & 2 & 5.75 & 21 \
\hline 5 & 10 & 50 & 6 & 26 & 3 & 5.20 & 24 \
\hline 6 & 9 & 54 & 4 & 30 & 4 & 5.00 & 24 \
\hline 7 & 8 & 56 & 2 & 35 & 5 & 5.00 & 21 \
\hline 8 & 7 & 56 & 0 & 42 & 7 & 5.25 & 14 \
\hline 9 & 6 & 54 & -2 & 52 & 10 & 5.78 & 2 \
\hline 10 & 5 & 50 & -4 & 78 & 16 & 7.80 & -28 \
\hline
\end{array}\) 
Illustrate this data by graphing the demand, MR, MC, and ATC curves.Identify the profit-maximizing price and quantity, and show the area representing the total profit received.

Accepted Answer

The answer of Unique to New Brunswick, Beausoleil oysters are...

Question 10

A monopolistically competitive industry that earns economic profits in the short run will be able to expand its market share even if the market size remains constant.

Accepted Answer

A) True 
 B)False

Question 11

Figure 11.7
   
Figure 11.7 shows short-run cost and demand curves for a monopolistically competitive firm in the market for designer watches.
-Refer to Figure 11.7.If the diagram represents a typical firm in the designer watch market, what is likely to happen in the long run?

Accepted Answer

A) Some firms will exit the market causing the demand to increase for firms remaining in the market. 
B) The firms that are making losses will be purchased by their more successful rivals. 
C) Inefficient firms will exit the market and new cost efficient firms will enter the market. 
D) Firms will have to raise their prices to cover costs of production. 
A) Some firms will exit the market causing the demand to increase for firms remaining in the market. 
B) The firms that are making losses will be purchased by their more successful rivals. 
C) Inefficient firms will exit the market and new cost efficient firms will enter the market. 
D) Firms will have to raise their prices to cover costs of production.

Question 12

Which of the following characteristics is common to monopolistic competition and perfect competition?

Accepted Answer

A) Firms produce identical products. 
B) Entry barriers into the industry are low. 
C) Each firm faces a downward-sloping demand curve. 
D) Firms take market prices as given. 
A) Firms produce identical products. 
B) Entry barriers into the industry are low. 
C) Each firm faces a downward-sloping demand curve. 
D) Firms take market prices as given.

Question 13

If a monopolistically competitive firm breaks even, the firm

Accepted Answer

A) is earning an accounting profit and will have to pay taxes on that profit. 
B) is earning zero accounting and zero economic profit. 
C) should advertise its product to stimulate demand. 
D) should expand production. 
A) is earning an accounting profit and will have to pay taxes on that profit. 
B) is earning zero accounting and zero economic profit. 
C) should advertise its product to stimulate demand. 
D) should expand production.

Question 14

Table 11.3
 $\begin{array}{|c|c|c|c|c|}
\hline \text { Quantity } & \begin{array}{c}
\text { Price } \
\text { (dollars) }
\end{array} & \begin{array}{c}
\text { Total Revenue } \
\text { (dollars) }
\end{array} & \begin{array}{c}
\text { Total Variable } \
\text { Cost } \
\text { (dollars) }
\end{array} & \begin{array}{c}
\text { Total Cost } \
\text { (dollars) }
\end{array} \
\hline 0 & \$ 21 & \$ 0 & \$ 0 & \$ 50 \
\hline 1 & 20 & 20 & 16 & 66 \
\hline 2 & 19 & 38 & 31 & 81 \
\hline 3 & 18 & 54 & 45 & 95 \
\hline 4 & 17 & 68 & 59 & 109 \
\hline 5 & 16 & 80 & 75 & 125 \
\hline 6 & 15 & 90 & 93 & 143 \
\hline 7 & 14 & 98 & 112 & 162 \
\hline 8 & 13 & 104 & 140 & 190 \
\hline 9 & 12 & 108 & 180 & 230 \
\hline 10 & 11 & 110 & 230 & 280 \
\hline
\end{array}$ 
Table 11.3 shows the demand and cost schedules for a monopolistically competitive firm.
-Refer to Table 11.3.If this firm continues to produce, what is likely to happen to the product's price in the long run?

Accepted Answer

A) It will fall. 
B) It will increase 
C) It will remain constant. 
D) It cannot be determined without information on its long run demand curve. 
A) It will fall. 
B) It will increase 
C) It will remain constant. 
D) It cannot be determined without information on its long run demand curve.

Question 15

Which of the following is true for a firm with a downward-sloping demand curve for its product?

Accepted Answer

A) Price, average revenue, and marginal revenue are all equal. 
B) Price, average revenue, and marginal revenue are all different. 
C) Price equals average revenue but is greater than marginal revenue. 
D) Price equals average revenue but is less than marginal revenue. 
A) Price, average revenue, and marginal revenue are all equal. 
B) Price, average revenue, and marginal revenue are all different. 
C) Price equals average revenue but is greater than marginal revenue. 
D) Price equals average revenue but is less than marginal revenue.

Question 16

Table 11.3
 $\begin{array}{|c|c|c|c|c|}
\hline \text { Quantity } & \begin{array}{c}
\text { Price } \
\text { (dollars) }
\end{array} & \begin{array}{c}
\text { Total Revenue } \
\text { (dollars) }
\end{array} & \begin{array}{c}
\text { Total Variable } \
\text { Cost } \
\text { (dollars) }
\end{array} & \begin{array}{c}
\text { Total Cost } \
\text { (dollars) }
\end{array} \
\hline 0 & \$ 21 & \$ 0 & \$ 0 & \$ 50 \
\hline 1 & 20 & 20 & 16 & 66 \
\hline 2 & 19 & 38 & 31 & 81 \
\hline 3 & 18 & 54 & 45 & 95 \
\hline 4 & 17 & 68 & 59 & 109 \
\hline 5 & 16 & 80 & 75 & 125 \
\hline 6 & 15 & 90 & 93 & 143 \
\hline 7 & 14 & 98 & 112 & 162 \
\hline 8 & 13 & 104 & 140 & 190 \
\hline 9 & 12 & 108 & 180 & 230 \
\hline 10 & 11 & 110 & 230 & 280 \
\hline
\end{array}$ 
Table 11.3 shows the demand and cost schedules for a monopolistically competitive firm.
-Refer to Table 11.3.What are the profit-maximizing/loss-minimizing output level and price?

Accepted Answer

A) Q=0 (firm should not produce) 
B) Q=3; P=$18 
C) Q=4; P=$17 
D) Q=5; P=$16 
A) Q=0 (firm should not produce) 
B) Q=3; P=$18 
C) Q=4; P=$17 
D) Q=5; P=$16

Question 17

When a monopolistically competitive firm cuts its price to increase its sales, it experiences a loss in revenue due to the

Accepted Answer

A) substitution effect. 
B) income effect. 
C) price effect. 
D) output effect. 
A) substitution effect. 
B) income effect. 
C) price effect. 
D) output effect.

Question 18

Some of the advantages Netflix had over companies like Blockbuster and Wal-Mart in successfully competing in the mail order DVD rental business include all of the following except

Accepted Answer

A) a quick turnaround of mailing out the customer's next DVD once the previous one was returned. 
B) an extensive system of storefront operations where customers could rent DVDs in person. 
C) an efficient system of processing DVDs returned from customers. 
D) a national system of warehouses allowing for quick customer delivery. 
A) a quick turnaround of mailing out the customer's next DVD once the previous one was returned. 
B) an extensive system of storefront operations where customers could rent DVDs in person. 
C) an efficient system of processing DVDs returned from customers. 
D) a national system of warehouses allowing for quick customer delivery.

Question 19

Recent research has shown that the first firm to enter a market often does not have a long-term advantage over later entrants into the market.The textbook used which of the following examples to illustrate this?

Accepted Answer

A) Tim Horton's entry into the breakfast sandwich market. 
B) Xerox, which became a generic term for making photocopies. 
C) lululemon athletica, which was the first clothing company to market yoga clothing. 
D) the introduction of the first ballpoint pen in 1945. 
A) Tim Horton's entry into the breakfast sandwich market. 
B) Xerox, which became a generic term for making photocopies. 
C) lululemon athletica, which was the first clothing company to market yoga clothing. 
D) the introduction of the first ballpoint pen in 1945.

Question 20

If marginal revenue is negative then the revenue lost from receiving a lower price on all the units that could have been sold at the original price is smaller than the additional revenue from selling one more unit of the good.

Accepted Answer

A) True 
 B)False

For a monopolistically competitive firm, marginal revenue

Is a monopolistically competitive firm allocatively efficient?

Figure 11.6 -Refer to Figure 11.6.What is the monopolistic competitor's profit maximizing output?

How does the long run equilibrium of a monopolistically competitive industry differ from that of a perfectly competitive industry?

A successful trademark is one that becomes a generic name for a product, for example, "Kleenex" has become a generic term for tissues.

If the demand curve for a firm is downward-sloping, its marginal revenue curve

In monopolistic competition there is/are

Figure 11.3 Figure 11.3 shows short-run cost and demand curves for a monopolistically competitive firm in the market for designer watches. -Refer to Figure 11.3.What is the area that represents the total revenue made by the firm?

A monopolistically competitive industry that earns economic profits in the short run will be able to expand its market share even if the market size remains constant.

Figure 11.7 Figure 11.7 shows short-run cost and demand curves for a monopolistically competitive firm in the market for designer watches. -Refer to Figure 11.7.If the diagram represents a typical firm in the designer watch market, what is likely to happen in the long run?

Which of the following characteristics is common to monopolistic competition and perfect competition?

If a monopolistically competitive firm breaks even, the firm

Which of the following is true for a firm with a downward-sloping demand curve for its product?

When a monopolistically competitive firm cuts its price to increase its sales, it experiences a loss in revenue due to the

Some of the advantages Netflix had over companies like Blockbuster and Wal-Mart in successfully competing in the mail order DVD rental business include all of the following except

Recent research has shown that the first firm to enter a market often does not have a long-term advantage over later entrants into the market.The textbook used which of the following examples to illustrate this?

If marginal revenue is negative then the revenue lost from receiving a lower price on all the units that could have been sold at the original price is smaller than the additional revenue from selling one more unit of the good.

Economics: Foundations and Models

Trade-Offs, Comparative Advantage, and the Market System

Where Prices Come From: the Interaction of Demand and Supply

Economic Efficiency, Government Price Setting, and Taxes

Externalities, Environmental Policy, and Public Goods

Elasticity: the Responsiveness of Demand and Supply

Comparative Advantage and the Gains From International Trade

Consumer Choice and Behavioral Economics

Technology, Production, and Costs

Firms in Perfectly Competitive Markets

Oligopoly: Firms in Less Competitive Markets

Monopoly and Antitrust Policy

The Markets for Labour and Other Factors of Production

Public Choice, Taxes, and the Distribution of Income

Pricing Strategy

Firms, the Stock Market, and Corporate Governance

Filters

Exam 11: Monopolistic Competition

For a monopolistically competitive firm, marginal revenue

Is a monopolistically competitive firm allocatively efficient?

Figure 11.6 -Refer to Figure 11.6.What is the monopolistic competitor's profit maximizing output?

How does the long run equilibrium of a monopolistically competitive industry differ from that of a perfectly competitive industry?

A successful trademark is one that becomes a generic name for a product, for example, "Kleenex" has become a generic term for tissues.

If the demand curve for a firm is downward-sloping, its marginal revenue curve

In monopolistic competition there is/are

Figure 11.3 Figure 11.3 shows short-run cost and demand curves for a monopolistically competitive firm in the market for designer watches. -Refer to Figure 11.3.What is the area that represents the total revenue made by the firm?

A monopolistically competitive industry that earns economic profits in the short run will be able to expand its market share even if the market size remains constant.

Figure 11.7 Figure 11.7 shows short-run cost and demand curves for a monopolistically competitive firm in the market for designer watches. -Refer to Figure 11.7.If the diagram represents a typical firm in the designer watch market, what is likely to happen in the long run?

Which of the following characteristics is common to monopolistic competition and perfect competition?

If a monopolistically competitive firm breaks even, the firm

Which of the following is true for a firm with a downward-sloping demand curve for its product?

When a monopolistically competitive firm cuts its price to increase its sales, it experiences a loss in revenue due to the

Some of the advantages Netflix had over companies like Blockbuster and Wal-Mart in successfully competing in the mail order DVD rental business include all of the following except

Recent research has shown that the first firm to enter a market often does not have a long-term advantage over later entrants into the market.The textbook used which of the following examples to illustrate this?

If marginal revenue is negative then the revenue lost from receiving a lower price on all the units that could have been sold at the original price is smaller than the additional revenue from selling one more unit of the good.

Economics: Foundations and Models

Trade-Offs, Comparative Advantage, and the Market System

Where Prices Come From: the Interaction of Demand and Supply

Economic Efficiency, Government Price Setting, and Taxes

Externalities, Environmental Policy, and Public Goods

Elasticity: the Responsiveness of Demand and Supply

Comparative Advantage and the Gains From International Trade

Consumer Choice and Behavioral Economics

Technology, Production, and Costs

Firms in Perfectly Competitive Markets

Oligopoly: Firms in Less Competitive Markets

Monopoly and Antitrust Policy

The Markets for Labour and Other Factors of Production

Public Choice, Taxes, and the Distribution of Income

Pricing Strategy

Firms, the Stock Market, and Corporate Governance

Filters