Question 1

New firms are able to enter monopolistically competitive markets because there are low barriers to entry.

Accepted Answer

A) True 
 B)False

Question 2

One way by which firms differentiate their products is to try to anticipate changes in consumer tastes and adapt their products to fit those changed tastes.

Accepted Answer

A) True 
 B)False

Question 3

The profit-maximizing rule for a monopolistically competitive firm is to select the quantity at which

Accepted Answer

A) marginal revenue equals marginal cost. 
B) average revenue exceeds marginal cost by the greatest amount. 
C) price equals marginal cost. 
D) average revenue equals average total cost. 
A) marginal revenue equals marginal cost. 
B) average revenue exceeds marginal cost by the greatest amount. 
C) price equals marginal cost. 
D) average revenue equals average total cost.

Question 4

A monopolistically competitive firm faces a downward-sloping demand curve because

Accepted Answer

A) it is able to control price and quantity demanded. 
B) there are few substitutes for its product. 
C) of product differentiation. 
D) its market decisions are affected by the decisions of its rivals. 
A) it is able to control price and quantity demanded. 
B) there are few substitutes for its product. 
C) of product differentiation. 
D) its market decisions are affected by the decisions of its rivals.

Question 5

Figure 13-11
  
-Refer to Figure 13-11.What is the amount of excess capacity?

Accepted Answer

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

Question 6

Of the factors that are within the control of the firm's owners, the most important factors that make a firm successful are

Accepted Answer

A) the establishment of trademarks for its products and the aggressive defense of those trademarks. 
B) lobbying government to erect or enforce entry barriers in its markets and the marketing of its products as widely as possible. 
C) the differentiation of its products and the production of products at a lower average cost than competing firms. 
D) the selection of the prices of its products and the selection of the most productive and loyal employees. 
A) the establishment of trademarks for its products and the aggressive defense of those trademarks. 
B) lobbying government to erect or enforce entry barriers in its markets and the marketing of its products as widely as possible. 
C) the differentiation of its products and the production of products at a lower average cost than competing firms. 
D) the selection of the prices of its products and the selection of the most productive and loyal employees.

Question 7

Table 13-2
   
Eco Energy is a monopolistically competitive producer of a sports beverage called Power On. Table 13-2 shows the firm's demand and cost schedules.
-Refer to Table 13-2.What is the output (Q)that maximizes profit and what is the price (P)charged?

Accepted Answer

A) P = $55; Q = 5 cases 
B) P = $50; Q = 6 cases 
C) P = $45; Q = 7 cases 
D) P = $40; Q = 8 cases 
A) P = $55; Q = 5 cases 
B) P = $50; Q = 6 cases 
C) P = $45; Q = 7 cases 
D) P = $40; Q = 8 cases

Question 8

In the long run, what happens to the demand curve facing a monopolistically competitive firm that is earning short-run profits?

Accepted Answer

A) The demand curve will shift to the left and became more elastic. 
B) The demand curve will shift to the left and became less elastic. 
C) The demand curve will shift to the right and became more elastic. 
D) The demand curve will shift to the right and became less elastic. 
A) The demand curve will shift to the left and became more elastic. 
B) The demand curve will shift to the left and became less elastic. 
C) The demand curve will shift to the right and became more elastic. 
D) The demand curve will shift to the right and became less elastic.

Question 9

Which of the following statements is true about monopolistically competitive firms?

Accepted Answer

A) Unlike perfectly competitive firms, monopolistically competitive firms are able to raise their prices without losing all of their customers. 
B) Like perfectly competitive firms, monopolistically competitive firms are not able to raise prices without losing all of their customers because they face competition from firms selling similar products. 
C) Like perfectly competitive firms, monopolistically competitive firms maximize their profits by setting price equal to marginal cost. 
D) Unlike perfectly competitive firms, monopolistically competitive face perfectly inelastic demand curves. 
A) Unlike perfectly competitive firms, monopolistically competitive firms are able to raise their prices without losing all of their customers. 
B) Like perfectly competitive firms, monopolistically competitive firms are not able to raise prices without losing all of their customers because they face competition from firms selling similar products. 
C) Like perfectly competitive firms, monopolistically competitive firms maximize their profits by setting price equal to marginal cost. 
D) Unlike perfectly competitive firms, monopolistically competitive face perfectly inelastic demand curves.

Question 10

How might a monopolistically competitive firm continually earn economic profit greater than zero?

Accepted Answer

A monopolistically competitive

Question 11

Figure 13-14
   
Figure 13-14 illustrates a monopolistically competitive firm.
-Refer to Figure 13-14.It is possible to lower the average cost of production by expanding output beyond Q₀ to Q₁.Why wouldn't a firm expand its output to Q₁?

Accepted Answer

A) The firm wants to maximize accounting profit rather than economic profit. 
B) The firm would suffer an economic loss at Q₁ while it would break even at Q₀. 
C) The firm's marginal revenue would be negative at Q₁. 
D) Demand is not sufficient for consumers to buy Q₁. 
A) The firm wants to maximize accounting profit rather than economic profit. 
B) The firm would suffer an economic loss at Q₁ while it would break even at Q₀. 
C) The firm's marginal revenue would be negative at Q₁. 
D) Demand is not sufficient for consumers to buy Q₁.

Question 12

A monopolistically competitive industry that earns economic profits in the short run will

Accepted Answer

A) continue to earn economic profits in the long run. 
B) experience the entry of new rival firms into the industry in the long run. 
C) experience the exit of existing firms out of the industry in the long run. 
D) experience a rise in demand in the long run. 
A) continue to earn economic profits in the long run. 
B) experience the entry of new rival firms into the industry in the long run. 
C) experience the exit of existing firms out of the industry in the long run. 
D) experience a rise in demand in the long run.

Question 13

Long-run equilibrium under monopolistic competition and perfect competition is similar in that

Accepted Answer

A) firms produce at the minimum point of their average cost curves. 
B) price equals marginal cost. 
C) firms break even. 
D) price equals marginal revenue. 
A) firms produce at the minimum point of their average cost curves. 
B) price equals marginal cost. 
C) firms break even. 
D) price equals marginal revenue.

Question 14

The ability to engage in product differentiation is one of the factors a manager or owner of a firm can control in order to create value for consumers.

Accepted Answer

A) True 
 B)False

Question 15

A franchise is

Accepted Answer

A) a firm that buys and operates a brand name business in a new market. 
B) a firm with the legal right to sell a good or service in a particular area. 
C) a firm with no competitors. 
D) a branch of a national company. 
A) a firm that buys and operates a brand name business in a new market. 
B) a firm with the legal right to sell a good or service in a particular area. 
C) a firm with no competitors. 
D) a branch of a national company.

Question 16

Monopolistic competition is a market structure in which

Accepted Answer

A) firms produce and sell products for which there are no close substitutes. 
B) the demand curve for a typical firm is horizontal. 
C) firms cannot influence the market price. 
D) barriers to entry are low. 
A) firms produce and sell products for which there are no close substitutes. 
B) the demand curve for a typical firm is horizontal. 
C) firms cannot influence the market price. 
D) barriers to entry are low.

Question 17

A monopolistically competitive firm should lower its price if its marginal revenue exceeds its marginal cost.

Accepted Answer

A) True 
 B)False

Question 18

For productive efficiency to hold,

Accepted Answer

A) price must equal the marginal cost of the last unit produced. 
B) price must equal marginal revenue of the last unit sold. 
C) the average variable cost must be minimized in production. 
D) the average total cost must be minimized in production. 
A) price must equal the marginal cost of the last unit produced. 
B) price must equal marginal revenue of the last unit sold. 
C) the average variable cost must be minimized in production. 
D) the average total cost must be minimized in production.

Question 19

If some monopolistically competitive firms exit their market after suffering short-run losses, the demand curves of remaining firms will shift to the right.

Accepted Answer

A) True 
 B)False

Question 20

Article Summary
In Colorado, recreational marijuana is legal but smoking in hotels is not. Former Wall Street lawyer Joel Schneider found a way around this legal conundrum by opening a bed-and-breakfast (B&B), which he refers to as Bud+Breakfast. In Colorado, B&Bs are considered private property and therefore not subject to the no-smoking laws, and Schneider does not allow guests under the age of 21, the legal age to buy marijuana in the state. With six suites ranging from $299 - $399 per night, revenues in 2016 averaged $110,000 per month. His success has allowed him to expand to three properties, with hopes of franchising to other states where recreational marijuana is also legal. 
Source: Jane Wells, "Weed entrepreneur brings in over $1 million a year running 'bud and breakfast' hotels," cnbc.com, January 18, 2017.
-Refer to the Article Summary.By marketing to recreational marijuana users, Joel Schneider is trying to set his business apart from competing hotels and lodging establishments.All else equal, if his concept remains successful, in the long run we would expect Schneider to experience

Accepted Answer

A) increased competition and lower economic profits. 
B) increased competition and higher economic profits. 
C) government regulation and no additional competition. 
D) rising average costs and long-run economic profits. 
A) increased competition and lower economic profits. 
B) increased competition and higher economic profits. 
C) government regulation and no additional competition. 
D) rising average costs and long-run economic profits.

New firms are able to enter monopolistically competitive markets because there are low barriers to entry.

One way by which firms differentiate their products is to try to anticipate changes in consumer tastes and adapt their products to fit those changed tastes.

The profit-maximizing rule for a monopolistically competitive firm is to select the quantity at which

A monopolistically competitive firm faces a downward-sloping demand curve because

Figure 13-11 -Refer to Figure 13-11.What is the amount of excess capacity?

Of the factors that are within the control of the firm's owners, the most important factors that make a firm successful are

Table 13-2 Eco Energy is a monopolistically competitive producer of a sports beverage called Power On. Table 13-2 shows the firm's demand and cost schedules. -Refer to Table 13-2.What is the output (Q)that maximizes profit and what is the price (P)charged?

In the long run, what happens to the demand curve facing a monopolistically competitive firm that is earning short-run profits?

Which of the following statements is true about monopolistically competitive firms?

How might a monopolistically competitive firm continually earn economic profit greater than zero?

Figure 13-14 Figure 13-14 illustrates a monopolistically competitive firm. -Refer to Figure 13-14.It is possible to lower the average cost of production by expanding output beyond Q₀ to Q₁.Why wouldn't a firm expand its output to Q₁?

A monopolistically competitive industry that earns economic profits in the short run will

Long-run equilibrium under monopolistic competition and perfect competition is similar in that

The ability to engage in product differentiation is one of the factors a manager or owner of a firm can control in order to create value for consumers.

A franchise is

Monopolistic competition is a market structure in which

A monopolistically competitive firm should lower its price if its marginal revenue exceeds its marginal cost.

For productive efficiency to hold,

If some monopolistically competitive firms exit their market after suffering short-run losses, the demand curves of remaining firms will shift to the right.

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

Exam 13: Monopolistic Competition: the Competitive Model in a

New firms are able to enter monopolistically competitive markets because there are low barriers to entry.

One way by which firms differentiate their products is to try to anticipate changes in consumer tastes and adapt their products to fit those changed tastes.

The profit-maximizing rule for a monopolistically competitive firm is to select the quantity at which

A monopolistically competitive firm faces a downward-sloping demand curve because

Figure 13-11 -Refer to Figure 13-11.What is the amount of excess capacity?

Of the factors that are within the control of the firm's owners, the most important factors that make a firm successful are

Table 13-2 Eco Energy is a monopolistically competitive producer of a sports beverage called Power On. Table 13-2 shows the firm's demand and cost schedules. -Refer to Table 13-2.What is the output (Q)that maximizes profit and what is the price (P)charged?

In the long run, what happens to the demand curve facing a monopolistically competitive firm that is earning short-run profits?

Which of the following statements is true about monopolistically competitive firms?

How might a monopolistically competitive firm continually earn economic profit greater than zero?

Figure 13-14 Figure 13-14 illustrates a monopolistically competitive firm. -Refer to Figure 13-14.It is possible to lower the average cost of production by expanding output beyond Q₀ to Q₁.Why wouldn't a firm expand its output to Q₁?

A monopolistically competitive industry that earns economic profits in the short run will

Long-run equilibrium under monopolistic competition and perfect competition is similar in that

The ability to engage in product differentiation is one of the factors a manager or owner of a firm can control in order to create value for consumers.

A franchise is

Monopolistic competition is a market structure in which

A monopolistically competitive firm should lower its price if its marginal revenue exceeds its marginal cost.

For productive efficiency to hold,

If some monopolistically competitive firms exit their market after suffering short-run losses, the demand curves of remaining firms will shift to the right.

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