Question 1

For the monopolistically competitive firm,

Accepted Answer

A) Price (P)= Marginal Revenue (MR)= Average Revenue (AR). 
B) P = MR > AR. 
C) P = AR > MR. 
D) P > MR = AR. 
A) Price (P)= Marginal Revenue (MR)= Average Revenue (AR). 
B) P = MR > AR. 
C) P = AR > MR. 
D) P > MR = AR.

Question 2

When a credit card company offers different services with its card, like travel insurance for air travel tickets purchased with the credit card or product insurance for items purchased with the card, the credit card company is trying to

Accepted Answer

A) create a barrier to entry for competing firms. 
B) create a perfectly competitive market in which to sell its credit card. 
C) convince customers that its card has greater value than those offered by rival firms. 
D) shift the demand curve for competing firms to the right. 
A) create a barrier to entry for competing firms. 
B) create a perfectly competitive market in which to sell its credit card. 
C) convince customers that its card has greater value than those offered by rival firms. 
D) shift the demand curve for competing firms to the right.

Question 3

Which of the following is not an example of a monopolistically competitive market?

Accepted Answer

A) automobile producers 
B) supermarkets 
C) gas stations 
D) makers of women's clothing 
A) automobile producers 
B) supermarkets 
C) gas stations 
D) makers of women's clothing

Question 4

Draw a graph that shows the impact on a firm's profit when it increases spending on advertising and the increased advertising has no effect on the demand for a firm's product.

Accepted Answer

The answer of Draw a graph that shows the impact...

Question 5

Figure 13-9
  
-Refer to Figure 13-9.Which of the graphs in the figure depicts a monopolistically competitive firm that is minimizing its losses?

Accepted Answer

A) Panel A 
B) Panel B 
C) Panel C 
D) Panel A and Panel C 
A) Panel A 
B) Panel B 
C) Panel C 
D) Panel A and Panel C

Question 6

________ describes the actions a firm takes to maintain the differentiation of its product over time.

Accepted Answer

A) Product differentiation 
B) Brand management 
C) Aggressive marketing 
D) Advertising 
A) Product differentiation 
B) Brand management 
C) Aggressive marketing 
D) Advertising

Question 7

Figure 13-17
  
-Refer to Figure 13-17.What is the amount of excess capacity?

Accepted Answer

A) Qh - Qf units 
B) Qⱼ - Qf units 
C) Qⱼ - Qh units 
D) Qh - Qg units 
A) Qh - Qf units 
B) Qⱼ - Qf units 
C) Qⱼ - Qh units 
D) Qh - Qg units

Question 8

Why are demand and marginal revenue represented by the same curve for a firm in a perfectly competitive market, but by separate curves for a firm in a monopolistically competitive market?

Accepted Answer

A perfectly competitive firm faces a hor

Question 9

Arturo runs a Taco Bell franchise.He is selling 250 Gordita Supremes per week at a price of $2.75.If he lowers the price to $2.70, he will sell 251 Gordita Supremes.What is the marginal revenue of the 251st Gordita Supreme? If selling the extra Gordita Supreme adds $0.20 to Arturo's costs, what will be the effect on his profit from selling 251 Gordita Supremes instead of 250?

Accepted Answer

The marginal revenue of the 251st Gordit

Question 10

Unlike a perfectly competitive firm, for a monopolistically competitive firm,

Accepted Answer

A) price ≠ marginal cost for all output levels. 
B) price ≠ marginal revenue for all output levels. 
C) price ≠ average revenue for all output levels. 
D) marginal revenue = marginal cost at the profit-maximizing output. 
A) price ≠ marginal cost for all output levels. 
B) price ≠ marginal revenue for all output levels. 
C) price ≠ average revenue for all output levels. 
D) marginal revenue = marginal cost at the profit-maximizing output.

Question 11

Productive efficiency does not hold for a profit-maximizing, monopolistically competitive firm in the long-run equilibrium because the firm operates along the diseconomies of scale region of its average total cost curve.

Accepted Answer

A) True 
 B)False

Question 12

Both monopolistically competitive firms and perfectly competitive firms maximize profits

Accepted Answer

A) by producing where price equals average total cost. 
B) by producing where marginal revenue equals average revenue. 
C) by producing where marginal revenue equals marginal cost. 
D) by producing where price equals average variable cost. 
A) by producing where price equals average total cost. 
B) by producing where marginal revenue equals average revenue. 
C) by producing where marginal revenue equals marginal cost. 
D) by producing where price equals average variable cost.

Question 13

Only one of the following statements is correct.The statements compare perfectly competitive (PC)markets and monopolistically competitive (MC)markets.Which statement is correct?

Accepted Answer

A) Productive efficiency is achieved in both PC and MC markets. Allocative efficiency is achieved only in MC markets. 
B) Allocative efficiency is achieved in both PC and MC markets. Productive efficiency is achieved only in PC markets. 
C) Productive efficiency and allocative efficiency are both achieved in PC markets. Neither is achieved in MC markets. 
D) Allocative efficiency is achieved only in PC markets. Productive efficiency is achieved only in MC markets. 
A) Productive efficiency is achieved in both PC and MC markets. Allocative efficiency is achieved only in MC markets. 
B) Allocative efficiency is achieved in both PC and MC markets. Productive efficiency is achieved only in PC markets. 
C) Productive efficiency and allocative efficiency are both achieved in PC markets. Neither is achieved in MC markets. 
D) Allocative efficiency is achieved only in PC markets. Productive efficiency is achieved only in MC markets.

Question 14

Table 13-5
   
Table 13-5 shows the demand and cost data facing a monopolistically competitive producer of canvas bags.
-Refer to Table 13-5.What are the firm's profit-maximizing or loss-minimizing price and quantity?

Accepted Answer

A) price = $10; quantity = 5. 
B) price = $12; quantity = 4. 
C) The firm should shut down temporarily. 
D) This cannot be determined from the information given. 
A) price = $10; quantity = 5. 
B) price = $12; quantity = 4. 
C) The firm should shut down temporarily. 
D) This cannot be determined from the information given.

Question 15

In the long run, firms in both monopolistically competitive markets and perfectly competitive markets earn zero economic profits, but unlike perfectly competitive firms in the long run, monopolistically competitive firms

Accepted Answer

A) charge a price that is greater than average revenue. 
B) charge a price that is equal to marginal cost. 
C) do not produce at minimum average total cost. 
D) charge a price that is equal to average total cost. 
A) charge a price that is greater than average revenue. 
B) charge a price that is equal to marginal cost. 
C) do not produce at minimum average total cost. 
D) charge a price that is equal to average total cost.

Question 16

Figure 13-13
  
-Refer to Figure 13-13.What is the area that represents the firm's profit?

Accepted Answer

A) profit = 0 
B) P₄edP₂ 
C) P₄eaP₁ 
D) P₃baP₂ 
A) profit = 0 
B) P₄edP₂ 
C) P₄eaP₁ 
D) P₃baP₂

Question 17

Table 13-3
   
Table 13-3 shows the demand and cost schedules for a monopolistically competitive firm.
-Refer to Table 13-3.What is its average variable cost of production at its optimal output level?

Accepted Answer

A) $0 (because its optimal output = 0) 
B) $15 
C) $14.75 
D) $29 
A) $0 (because its optimal output = 0) 
B) $15 
C) $14.75 
D) $29

Question 18

A firm that is first to the market with a new product frequently discovers that there are design flaws or problems with the product that were not anticipated.How do these problems affect the innovating firm?

Accepted Answer

A) The firm is protected by a first-mover advantage: initial design flaws tend not to harm a firm significantly because consumers resist changing products for fear of incurring high switching costs. 
B) They reduce profits for the new innovations and open the door to competitors who can enter the new market with a better product. 
C) Because these design flaws were not anticipated, consumers tend to be more forgiving and are likely to remain loyal to the company and its products. 
D) The firm's cost increases as it improves the product but it will not be able to raise its price for fear of alienating customers. Consequently, its profits will erode although its market share remains secure. 
A) The firm is protected by a first-mover advantage: initial design flaws tend not to harm a firm significantly because consumers resist changing products for fear of incurring high switching costs. 
B) They reduce profits for the new innovations and open the door to competitors who can enter the new market with a better product. 
C) Because these design flaws were not anticipated, consumers tend to be more forgiving and are likely to remain loyal to the company and its products. 
D) The firm's cost increases as it improves the product but it will not be able to raise its price for fear of alienating customers. Consequently, its profits will erode although its market share remains secure.

Question 19

Advertising is the action of a firm that is intended to maintain the differentiation of its product over time.

Accepted Answer

A) True 
 B)False

Question 20

Figure 13-17
  
-Refer to Figure 13-17.In the long run, why will the firm produce Qf units and not Qg units, which has a lower average cost of production?

Accepted Answer

A) Although its average cost of production is lower when the firm produces Qg units, to be able to sell its output the firm will have to charge a price below average cost, resulting in a loss. 
B) At Qg, average cost exceeds marginal cost so the firm will actually make a loss. 
C) At Qg, marginal revenue is less than average revenue which will result in a loss for the firm. 
D) The firm's goal is to charge a high price and make a small profit rather than a low price and no profit. 
A) Although its average cost of production is lower when the firm produces Qg units, to be able to sell its output the firm will have to charge a price below average cost, resulting in a loss. 
B) At Qg, average cost exceeds marginal cost so the firm will actually make a loss. 
C) At Qg, marginal revenue is less than average revenue which will result in a loss for the firm. 
D) The firm's goal is to charge a high price and make a small profit rather than a low price and no profit.

For the monopolistically competitive firm,

When a credit card company offers different services with its card, like travel insurance for air travel tickets purchased with the credit card or product insurance for items purchased with the card, the credit card company is trying to

Which of the following is not an example of a monopolistically competitive market?

Draw a graph that shows the impact on a firm's profit when it increases spending on advertising and the increased advertising has no effect on the demand for a firm's product.

Figure 13-9 -Refer to Figure 13-9.Which of the graphs in the figure depicts a monopolistically competitive firm that is minimizing its losses?

________ describes the actions a firm takes to maintain the differentiation of its product over time.

Figure 13-17 -Refer to Figure 13-17.What is the amount of excess capacity?

Why are demand and marginal revenue represented by the same curve for a firm in a perfectly competitive market, but by separate curves for a firm in a monopolistically competitive market?

Unlike a perfectly competitive firm, for a monopolistically competitive firm,

Productive efficiency does not hold for a profit-maximizing, monopolistically competitive firm in the long-run equilibrium because the firm operates along the diseconomies of scale region of its average total cost curve.

Both monopolistically competitive firms and perfectly competitive firms maximize profits

Only one of the following statements is correct.The statements compare perfectly competitive (PC)markets and monopolistically competitive (MC)markets.Which statement is correct?

Table 13-5 Table 13-5 shows the demand and cost data facing a monopolistically competitive producer of canvas bags. -Refer to Table 13-5.What are the firm's profit-maximizing or loss-minimizing price and quantity?

In the long run, firms in both monopolistically competitive markets and perfectly competitive markets earn zero economic profits, but unlike perfectly competitive firms in the long run, monopolistically competitive firms

Figure 13-13 -Refer to Figure 13-13.What is the area that represents the firm's profit?

Table 13-3 Table 13-3 shows the demand and cost schedules for a monopolistically competitive firm. -Refer to Table 13-3.What is its average variable cost of production at its optimal output level?

A firm that is first to the market with a new product frequently discovers that there are design flaws or problems with the product that were not anticipated.How do these problems affect the innovating firm?

Advertising is the action of a firm that is intended to maintain the differentiation of its product over time.

Figure 13-17 -Refer to Figure 13-17.In the long run, why will the firm produce Qf units and not Qg units, which has a lower average cost of production?

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

For the monopolistically competitive firm,

When a credit card company offers different services with its card, like travel insurance for air travel tickets purchased with the credit card or product insurance for items purchased with the card, the credit card company is trying to

Which of the following is not an example of a monopolistically competitive market?

Draw a graph that shows the impact on a firm's profit when it increases spending on advertising and the increased advertising has no effect on the demand for a firm's product.

Figure 13-9 -Refer to Figure 13-9.Which of the graphs in the figure depicts a monopolistically competitive firm that is minimizing its losses?

________ describes the actions a firm takes to maintain the differentiation of its product over time.

Figure 13-17 -Refer to Figure 13-17.What is the amount of excess capacity?

Why are demand and marginal revenue represented by the same curve for a firm in a perfectly competitive market, but by separate curves for a firm in a monopolistically competitive market?

Unlike a perfectly competitive firm, for a monopolistically competitive firm,

Productive efficiency does not hold for a profit-maximizing, monopolistically competitive firm in the long-run equilibrium because the firm operates along the diseconomies of scale region of its average total cost curve.

Both monopolistically competitive firms and perfectly competitive firms maximize profits

Only one of the following statements is correct.The statements compare perfectly competitive (PC)markets and monopolistically competitive (MC)markets.Which statement is correct?

Table 13-5 Table 13-5 shows the demand and cost data facing a monopolistically competitive producer of canvas bags. -Refer to Table 13-5.What are the firm's profit-maximizing or loss-minimizing price and quantity?

In the long run, firms in both monopolistically competitive markets and perfectly competitive markets earn zero economic profits, but unlike perfectly competitive firms in the long run, monopolistically competitive firms

Figure 13-13 -Refer to Figure 13-13.What is the area that represents the firm's profit?

Table 13-3 Table 13-3 shows the demand and cost schedules for a monopolistically competitive firm. -Refer to Table 13-3.What is its average variable cost of production at its optimal output level?

A firm that is first to the market with a new product frequently discovers that there are design flaws or problems with the product that were not anticipated.How do these problems affect the innovating firm?

Advertising is the action of a firm that is intended to maintain the differentiation of its product over time.

Figure 13-17 -Refer to Figure 13-17.In the long run, why will the firm produce Qf units and not Qg units, which has a lower average cost of production?

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