Question 1

Which of the following characterizes the market that Panera Bread competes in?

Accepted Answer

A) All "fast-casual" restaurants face horizontal demand curves. 
B) "Fast-casual" restaurants sell identical products. 
C) Barriers to entry are low. 
D) There are a small number of firms. 
A) All "fast-casual" restaurants face horizontal demand curves. 
B) "Fast-casual" restaurants sell identical products. 
C) Barriers to entry are low. 
D) There are a small number of firms.

Question 2

Figure 13-11
  
-Refer to Figure 13-11.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

Question 3

A monopolistically competitive firm will

Accepted Answer

A) charge the same price as its competitors do. 
B) always produce at the minimum efficient scale of production. 
C) have some control over its price because its product is differentiated. 
D) produce an output level that is productively and allocatively efficient. 
A) charge the same price as its competitors do. 
B) always produce at the minimum efficient scale of production. 
C) have some control over its price because its product is differentiated. 
D) produce an output level that is productively and allocatively efficient.

Question 4

Figure 13-8
   
Figure 13-8 shows cost and demand curves for a monopolistically competitive producer of iced tea.
-Refer to Figure 13-8.What is the firm's profit-maximizing price?

Accepted Answer

A) $12 
B) $13 
C) $14 
D) $16 
A) $12 
B) $13 
C) $14 
D) $16

Question 5

A monopolistic competitor does not earn profits in the long run unless it can successfully differentiate its product in the minds of its consumers.

Accepted Answer

A) True 
 B)False

Question 6

You are planning to open a new Italian restaurant in your hometown where there are three other Italian restaurants.You plan to distinguish your restaurant from your competitors by offering northern Italian cuisine and using locally grown organic produce.What is likely to happen in the restaurant market in your hometown after you open?

Accepted Answer

A) Your competitors are likely to change their menus to make their products more similar to yours. 
B) The demand curve facing each restaurant owner shifts to the right. 
C) The demand curve facing each restaurant owner becomes more elastic. 
D) While the demand curves facing your competitors becomes more elastic, your demand curve will be inelastic. 
A) Your competitors are likely to change their menus to make their products more similar to yours. 
B) The demand curve facing each restaurant owner shifts to the right. 
C) The demand curve facing each restaurant owner becomes more elastic. 
D) While the demand curves facing your competitors becomes more elastic, your demand curve will be inelastic.

Question 7

Figure 13-5
  
-Refer to Figure 13-5.The candy store represented in the diagram is currently selling Qₐ units of candy at a price of Pₐ.Is this candy store maximizing its profit and if it is not, what would you recommend to the firm?

Accepted Answer

A) Yes, it is maximizing its profit by charging the highest price possible. 
B) No, it is not; since its marginal cost is constant, it should produce and sell as much candy as it can. It should sell Qd units at a price of Pd. 
C) No, it is not; it should lower its price to Pc and sell Qc units. 
D) No, it is not; it should lower its price to Pb and sell Qb units. 
A) Yes, it is maximizing its profit by charging the highest price possible. 
B) No, it is not; since its marginal cost is constant, it should produce and sell as much candy as it can. It should sell Qd units at a price of Pd. 
C) No, it is not; it should lower its price to Pc and sell Qc units. 
D) No, it is not; it should lower its price to Pb and sell Qb units.

Question 8

If a monopolistically competitive firm has excess capacity,

Accepted Answer

A) it has exhausted all economies of scale. 
B) it is producing beyond the minimum efficient scale. 
C) it is experiencing diseconomies of scale. 
D) it produces a level of output that places it on the negatively sloped portion of its average total cost curve. 
A) it has exhausted all economies of scale. 
B) it is producing beyond the minimum efficient scale. 
C) it is experiencing diseconomies of scale. 
D) it produces a level of output that places it on the negatively sloped portion of its average total cost curve.

Question 9

Figure 13-4
   
Figure 13-4 shows short-run cost and demand curves for a monopolistically competitive firm in the market for designer watches.
-Refer to Figure 13-4.What is the area that represents the total variable cost of production?

Accepted Answer

A) 0P₀aQₐ 
B) 0P₁bQₐ 
C) P₀abP₁ 
D) P₁bdP₃ 
A) 0P₀aQₐ 
B) 0P₁bQₐ 
C) P₀abP₁ 
D) P₁bdP₃

Question 10

Firms in monopolistic competition compete by selling similar, but not identical products.

Accepted Answer

A) True 
 B)False

Question 11

In the short run, a profit-maximizing firm's decision to produce should be guided by whether

Accepted Answer

A) it makes a profit. 
B) its marginal profit is maximized. 
C) its total revenue exceeds its fixed cost. 
D) its total revenue covers its variable cost. 
A) it makes a profit. 
B) its marginal profit is maximized. 
C) its total revenue exceeds its fixed cost. 
D) its total revenue covers its variable cost.

Question 12

Sparkle, one of many firms in the market for toothpaste, is in a long-run equilibrium.As do all of its competitors, Sparkle has a small market share, and Sparkle has been in business for a long time.
a.Identify the market structure in which Sparkle operates.Explain your answer.
b.What is Sparkle's profit or loss? Explain your answer.If you cannot determine the profit or loss, explain what information is missing.
c.Draw a diagram showing Sparkle's demand curve, marginal revenue curve, average total cost curve, and marginal cost curve.Label your diagram.

Accepted Answer

a.Monopolistic competition; pr

Question 13

One goal a firm tries to achieve when it advertises a product is to

Accepted Answer

A) make the demand curve for the product more elastic. 
B) shift the demand curve for the product to the left. 
C) make the demand curve for the product unitary elastic. 
D) make the demand curve for the product more inelastic. 
A) make the demand curve for the product more elastic. 
B) shift the demand curve for the product to the left. 
C) make the demand curve for the product unitary elastic. 
D) make the demand curve for the product more inelastic.

Question 14

If a firm faces a downward-sloping demand curve,

Accepted Answer

A) the demand for its product must be inelastic. 
B) it has no control over the price or the quantity sold. 
C) it must reduce its price to sell more units. 
D) it will always make a profit. 
A) the demand for its product must be inelastic. 
B) it has no control over the price or the quantity sold. 
C) it must reduce its price to sell more units. 
D) it will always make a profit.

Question 15

For a monopolistically competitive firm, price equals average revenue.

Accepted Answer

A) True 
 B)False

Question 16

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.

Question 17

Assuming that the total market size remains constant, a monopolistically competitive firm earning profits in the short run will find the demand for its product decreasing in the long run because

Accepted Answer

A) new entrants into the market are more likely to have cutting edge products. 
B) as the firm raises its price in the long run, it will lose some customers to new entrants in the market. 
C) some of its customers have switched to purchasing the products of new entrants in the market. 
D) its costs of production rises. 
A) new entrants into the market are more likely to have cutting edge products. 
B) as the firm raises its price in the long run, it will lose some customers to new entrants in the market. 
C) some of its customers have switched to purchasing the products of new entrants in the market. 
D) its costs of production rises.

Question 18

In both monopolistically competitive and perfectly competitive industries

Accepted Answer

A) firms produce products for which there are no close substitutes. 
B) there are high barriers to entry. 
C) there are many buyers and sellers. 
D) firms are price takers. 
A) firms produce products for which there are no close substitutes. 
B) there are high barriers to entry. 
C) there are many buyers and sellers. 
D) firms are price takers.

Question 19

Suppose that if a local McDonald's restaurant reduces the price of a Big Mac from $4.00 to $3.25, the number of Big Macs it sells per day will increase from 4 to 5.Explain the output effect and the price effect resulting from this change.Using a graph, illustrate both the loss in revenue from selling each of the first 4 Big Macs for $0.75 less and the additional revenue from selling 1 more Big Mac.What is the total change in revenue received which results from this price decrease?

Accepted Answer

The 1 extra Big Mac sold is the output e

Question 20

Figure 13-4
   
Figure 13-4 shows short-run cost and demand curves for a monopolistically competitive firm in the market for designer watches.
-Refer to Figure 13-4.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

Which of the following characterizes the market that Panera Bread competes in?

Figure 13-11 -Refer to Figure 13-11.What is the monopolistic competitor's profit-maximizing output?

A monopolistically competitive firm will

Figure 13-8 Figure 13-8 shows cost and demand curves for a monopolistically competitive producer of iced tea. -Refer to Figure 13-8.What is the firm's profit-maximizing price?

A monopolistic competitor does not earn profits in the long run unless it can successfully differentiate its product in the minds of its consumers.

Figure 13-5 -Refer to Figure 13-5.The candy store represented in the diagram is currently selling Qₐ units of candy at a price of Pₐ.Is this candy store maximizing its profit and if it is not, what would you recommend to the firm?

If a monopolistically competitive firm has excess capacity,

Figure 13-4 Figure 13-4 shows short-run cost and demand curves for a monopolistically competitive firm in the market for designer watches. -Refer to Figure 13-4.What is the area that represents the total variable cost of production?

Firms in monopolistic competition compete by selling similar, but not identical products.

In the short run, a profit-maximizing firm's decision to produce should be guided by whether

One goal a firm tries to achieve when it advertises a product is to

If a firm faces a downward-sloping demand curve,

For a monopolistically competitive firm, price equals average revenue.

Is a monopolistically competitive firm allocatively efficient?

Assuming that the total market size remains constant, a monopolistically competitive firm earning profits in the short run will find the demand for its product decreasing in the long run because

In both monopolistically competitive and perfectly competitive industries

Figure 13-4 Figure 13-4 shows short-run cost and demand curves for a monopolistically competitive firm in the market for designer watches. -Refer to Figure 13-4.What is the area that represents the total revenue made by the firm?

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

The Economics of Health Care

Firms, the Stock Market, and Corporate Governance

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

Pricing Strategy

The Markets for Labor and Other Factors of Production

Public Choice, Taxes, and the Distribution of Income

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Exam 13: Monopolistic Competition: the Competitive Model in a

Which of the following characterizes the market that Panera Bread competes in?

Figure 13-11 -Refer to Figure 13-11.What is the monopolistic competitor's profit-maximizing output?

A monopolistically competitive firm will

Figure 13-8 Figure 13-8 shows cost and demand curves for a monopolistically competitive producer of iced tea. -Refer to Figure 13-8.What is the firm's profit-maximizing price?

A monopolistic competitor does not earn profits in the long run unless it can successfully differentiate its product in the minds of its consumers.

Figure 13-5 -Refer to Figure 13-5.The candy store represented in the diagram is currently selling Qₐ units of candy at a price of Pₐ.Is this candy store maximizing its profit and if it is not, what would you recommend to the firm?

If a monopolistically competitive firm has excess capacity,

Figure 13-4 Figure 13-4 shows short-run cost and demand curves for a monopolistically competitive firm in the market for designer watches. -Refer to Figure 13-4.What is the area that represents the total variable cost of production?

Firms in monopolistic competition compete by selling similar, but not identical products.

In the short run, a profit-maximizing firm's decision to produce should be guided by whether

One goal a firm tries to achieve when it advertises a product is to

If a firm faces a downward-sloping demand curve,

For a monopolistically competitive firm, price equals average revenue.

Is a monopolistically competitive firm allocatively efficient?

Assuming that the total market size remains constant, a monopolistically competitive firm earning profits in the short run will find the demand for its product decreasing in the long run because

In both monopolistically competitive and perfectly competitive industries

Figure 13-4 Figure 13-4 shows short-run cost and demand curves for a monopolistically competitive firm in the market for designer watches. -Refer to Figure 13-4.What is the area that represents the total revenue made by the firm?

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

The Economics of Health Care

Firms, the Stock Market, and Corporate Governance

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

Pricing Strategy

The Markets for Labor and Other Factors of Production

Public Choice, Taxes, and the Distribution of Income

Filters