Question 1

Which of the following is not a characteristic of monopolistic competition?

Accepted Answer

A) Firms are price takers. 
B) There are many buyers and sellers. 
C) Barriers to entry are low. 
D) Firms sell similar, but not identical, products. 
A) Firms are price takers. 
B) There are many buyers and sellers. 
C) Barriers to entry are low. 
D) Firms sell similar, but not identical, products.

Question 2

To maximize their profits and defend those profits from competitors, monopolistically competitive firms must

Accepted Answer

A) lobby government to erect barriers to entry in their industries. 
B) limit foreign competition in their markets by encouraging the government to impose tariffs and other trade restrictions. 
C) differentiate their products. 
D) achieve economies of scale. 
A) lobby government to erect barriers to entry in their industries. 
B) limit foreign competition in their markets by encouraging the government to impose tariffs and other trade restrictions. 
C) differentiate their products. 
D) achieve economies of scale.

Question 3

Consumers benefit from monopolistic competition by

Accepted Answer

A) being able to choose from products more closely suited to their tastes. 
B) paying the lowest possible price for the product. 
C) paying the same price as everyone else. 
D) being able to purchase high-quality products at low prices. 
A) being able to choose from products more closely suited to their tastes. 
B) paying the lowest possible price for the product. 
C) paying the same price as everyone else. 
D) being able to purchase high-quality products at low prices.

Question 4

For a downward-sloping demand curve, the marginal revenue decreases as the quantity sold increases.

Accepted Answer

A) True 
 B)False

Question 5

What is the profit-maximizing rule for a monopolistically competitive firm?

Accepted Answer

A) to produce a quantity that maximizes market share 
B) to produce a quantity that maximizes total revenue 
C) to produce a quantity such that marginal revenue equals marginal cost 
D) to produce a quantity such that price equals marginal cost 
A) to produce a quantity that maximizes market share 
B) to produce a quantity that maximizes total revenue 
C) to produce a quantity such that marginal revenue equals marginal cost 
D) to produce a quantity such that price equals marginal cost

Question 6

How would a marketing campaign directed at single women improve the chances of success at a place like a cigar bar?

Accepted Answer

By marketing to single women, a cigar ba

Question 7

Both the perfectly competitive firm and the monopolistically competitive firm produce at the output where marginal revenue equals marginal cost (MR = MC)but only the perfectly competitive firm achieves allocative efficiency.Explain why this is the case.

Accepted Answer

Unlike the perfectly competitive firm, t

Question 8

Firms use two marketing tools to differentiate their products.What are these two tools?

Accepted Answer

A) lobbying and word of mouth 
B) market research and demand estimation 
C) brand management and advertising 
D) consumer surveys and market experiments 
A) lobbying and word of mouth 
B) market research and demand estimation 
C) brand management and advertising 
D) consumer surveys and market experiments

Question 9

The long-run equilibrium in a monopolistically competitive market is similar to the long-run equilibrium in a perfectly competitive market in that in both markets, firms

Accepted Answer

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

Question 10

The economic analysis of monopolistic competition shows that market forces eliminate profits in the long run.However, it is possible for a firm to continue to earn economic profits if the firm

Accepted Answer

A) expands its marketing budget. 
B) adopts new technologies that enable it to lower its cost of production. 
C) expands its product offerings to appeal to a wider range of consumers. 
D) reduces its price to expand its market. 
A) expands its marketing budget. 
B) adopts new technologies that enable it to lower its cost of production. 
C) expands its product offerings to appeal to a wider range of consumers. 
D) reduces its price to expand its market.

Question 11

Excess capacity is a characteristic of monopolistically competitive firms.What does excess capacity mean?

Accepted Answer

A) It means that firms do not produce the output level that corresponds to the minimum point on their average total cost curves. 
B) It means that firms hire more than the minimum number of workers needed to produce the profit-maximizing level of output. 
C) It means that firms produce with inefficient combinations of resources. 
D) It means that firms build plants that are not large enough to achieve minimum efficient scale. 
A) It means that firms do not produce the output level that corresponds to the minimum point on their average total cost curves. 
B) It means that firms hire more than the minimum number of workers needed to produce the profit-maximizing level of output. 
C) It means that firms produce with inefficient combinations of resources. 
D) It means that firms build plants that are not large enough to achieve minimum efficient scale.

Question 12

You have just opened a new Italian restaurant in your hometown where there are three other Italian restaurants.Your restaurant is doing a brisk business and you attribute your success to your distinctive northern Italian cuisine using locally grown organic produce.What is likely to happen to your business in the long run?

Accepted Answer

A) Your competitors are likely to change their menus to make their products more similar to yours. 
B) Your success will invite others to open competing restaurants and ultimately your profits will be driven to zero. 
C) If your success continues, you will be likely to establish a franchise and expand your market size. 
D) If you continue to maintain consistent quality, you will be able to earn profits indefinitely. 
A) Your competitors are likely to change their menus to make their products more similar to yours. 
B) Your success will invite others to open competing restaurants and ultimately your profits will be driven to zero. 
C) If your success continues, you will be likely to establish a franchise and expand your market size. 
D) If you continue to maintain consistent quality, you will be able to earn profits indefinitely.

Question 13

Table 13-4
   
Table 13-4 lists estimated revenues and costs (per week)for plastic vials (100 vials per box)for the Victoria Biological Supplies Company. Victoria sells plastic vials to universities and private research laboratories.
-Refer to Table 13-4.Victoria's profit-maximizing output is where

Accepted Answer

A) total profit equals $3. 
B) marginal revenue and marginal cost both equal $4. 
C) marginal revenue and marginal cost both equal $3. 
D) marginal cost is at its minimum value. 
A) total profit equals $3. 
B) marginal revenue and marginal cost both equal $4. 
C) marginal revenue and marginal cost both equal $3. 
D) marginal cost is at its minimum value.

Question 14

Which of the following will not happen as a consequence of a monopolistically competitive firm suffering economic losses in the short run?

Accepted Answer

A) The firm's demand curve will shift to the right if it stays in business in the long run. 
B) The firm will exit the industry if it continues to suffer economic losses. 
C) The firm will break even if its stays in business in the long run. 
D) In the long run, the firm will be able to charge a price that is greater than its average total cost. 
A) The firm's demand curve will shift to the right if it stays in business in the long run. 
B) The firm will exit the industry if it continues to suffer economic losses. 
C) The firm will break even if its stays in business in the long run. 
D) In the long run, the firm will be able to charge a price that is greater than its average total cost.

Question 15

Which of the following is not a characteristic of monopolistic competition?

Accepted Answer

A) There are many buyers and sellers. 
B) There are low barriers to entry. 
C) Average revenue is equal to price. 
D) The products sold by all firms are identical. 
A) There are many buyers and sellers. 
B) There are low barriers to entry. 
C) Average revenue is equal to price. 
D) The products sold by all firms are identical.

Question 16

There are many wheat farmers in the world, and there are also many McDonald's restaurants in the world.Why, then, does a McDonald's restaurant face a downward-sloping demand curve while a wheat farmer faces a horizontal demand curve?

Accepted Answer

Wheat farmers are selling identical good

Question 17

A monopolistically competitive firm is producing an output level where marginal revenue is greater than marginal cost.What should this firm do to increase its profit or reduce its losses?

Accepted Answer

A) The firm should raise its price. 
B) The firm should decrease its fixed costs. 
C) The firm should increase its implicit costs. 
D) The firm should lower its price. 
A) The firm should raise its price. 
B) The firm should decrease its fixed costs. 
C) The firm should increase its implicit costs. 
D) The firm should lower its price.

Question 18

Consumers in monopolistically competitive markets face a trade-off between paying prices greater than marginal costs and purchasing products that are more closely suited to their tastes.

Accepted Answer

A) True 
 B)False

Question 19

Which of the following is not a characteristic of a monopolistically competitive firm in long-run equilibrium?

Accepted Answer

A) Marginal revenue is equal to marginal cost. 
B) Price is equal to average revenue. 
C) The firm has excess capacity. 
D) Price is equal to marginal cost. 
A) Marginal revenue is equal to marginal cost. 
B) Price is equal to average revenue. 
C) The firm has excess capacity. 
D) Price is equal to marginal cost.

Question 20

Central Grocery in New Orleans is famous for its muffaletta, a large round sandwich filled with deli meats and topped with a tangy olive salad.Suppose the following table represents cost and revenue data for Central Grocery.
   
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 by Central Grocery.

Accepted Answer

The answer of Central Grocery in New Orleans is famous...

Which of the following is not a characteristic of monopolistic competition?

To maximize their profits and defend those profits from competitors, monopolistically competitive firms must

Consumers benefit from monopolistic competition by

For a downward-sloping demand curve, the marginal revenue decreases as the quantity sold increases.

What is the profit-maximizing rule for a monopolistically competitive firm?

How would a marketing campaign directed at single women improve the chances of success at a place like a cigar bar?

Both the perfectly competitive firm and the monopolistically competitive firm produce at the output where marginal revenue equals marginal cost (MR = MC)but only the perfectly competitive firm achieves allocative efficiency.Explain why this is the case.

Firms use two marketing tools to differentiate their products.What are these two tools?

The long-run equilibrium in a monopolistically competitive market is similar to the long-run equilibrium in a perfectly competitive market in that in both markets, firms

The economic analysis of monopolistic competition shows that market forces eliminate profits in the long run.However, it is possible for a firm to continue to earn economic profits if the firm

Excess capacity is a characteristic of monopolistically competitive firms.What does excess capacity mean?

Table 13-4 Table 13-4 lists estimated revenues and costs (per week)for plastic vials (100 vials per box)for the Victoria Biological Supplies Company. Victoria sells plastic vials to universities and private research laboratories. -Refer to Table 13-4.Victoria's profit-maximizing output is where

Which of the following will not happen as a consequence of a monopolistically competitive firm suffering economic losses in the short run?

Which of the following is not a characteristic of monopolistic competition?

There are many wheat farmers in the world, and there are also many McDonald's restaurants in the world.Why, then, does a McDonald's restaurant face a downward-sloping demand curve while a wheat farmer faces a horizontal demand curve?

A monopolistically competitive firm is producing an output level where marginal revenue is greater than marginal cost.What should this firm do to increase its profit or reduce its losses?

Consumers in monopolistically competitive markets face a trade-off between paying prices greater than marginal costs and purchasing products that are more closely suited to their tastes.

Which of the following is not a characteristic of a monopolistically competitive firm in long-run equilibrium?

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

Which of the following is not a characteristic of monopolistic competition?

To maximize their profits and defend those profits from competitors, monopolistically competitive firms must

Consumers benefit from monopolistic competition by

For a downward-sloping demand curve, the marginal revenue decreases as the quantity sold increases.

What is the profit-maximizing rule for a monopolistically competitive firm?

How would a marketing campaign directed at single women improve the chances of success at a place like a cigar bar?

Both the perfectly competitive firm and the monopolistically competitive firm produce at the output where marginal revenue equals marginal cost (MR = MC)but only the perfectly competitive firm achieves allocative efficiency.Explain why this is the case.

Firms use two marketing tools to differentiate their products.What are these two tools?

The long-run equilibrium in a monopolistically competitive market is similar to the long-run equilibrium in a perfectly competitive market in that in both markets, firms

The economic analysis of monopolistic competition shows that market forces eliminate profits in the long run.However, it is possible for a firm to continue to earn economic profits if the firm

Excess capacity is a characteristic of monopolistically competitive firms.What does excess capacity mean?

Table 13-4 Table 13-4 lists estimated revenues and costs (per week)for plastic vials (100 vials per box)for the Victoria Biological Supplies Company. Victoria sells plastic vials to universities and private research laboratories. -Refer to Table 13-4.Victoria's profit-maximizing output is where

Which of the following will not happen as a consequence of a monopolistically competitive firm suffering economic losses in the short run?

Which of the following is not a characteristic of monopolistic competition?

There are many wheat farmers in the world, and there are also many McDonald's restaurants in the world.Why, then, does a McDonald's restaurant face a downward-sloping demand curve while a wheat farmer faces a horizontal demand curve?

A monopolistically competitive firm is producing an output level where marginal revenue is greater than marginal cost.What should this firm do to increase its profit or reduce its losses?

Consumers in monopolistically competitive markets face a trade-off between paying prices greater than marginal costs and purchasing products that are more closely suited to their tastes.

Which of the following is not a characteristic of a monopolistically competitive firm in long-run equilibrium?

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