Question 1

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 2

A monopolistically competitive firm 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 3

Suppose a monopolistically competitive firm's output where marginal revenue equals marginal cost is 66 units and the price corresponding to this quantity is $18.If the average total cost at this output is $16.55, then its total profit is

Accepted Answer

A) $1,188. 
B) $1,092.30. 
C) $95.70. 
D) $1.45. 
A) $1,188. 
B) $1,092.30. 
C) $95.70. 
D) $1.45.

Question 4

The Jeans Store sells 7 pairs of jeans per day when it charges $100 per pair.It sells 8 pairs of jeans per day at a price of $90 per pair.The marginal revenue of the eighth pair of jeans is

Accepted Answer

A) $20. 
B) $90. 
C) $100. 
D) $700. 
A) $20. 
B) $90. 
C) $100. 
D) $700.

Question 5

The table below shows the demand and cost data facing "Velvet Touches," a monopolistically competitive producer of velvet throw pillows.
   
Use the data to answer the following questions.
a.Complete the Total Revenue (TR), Marginal Revenue (MR), and Marginal Cost (MC)columns above.
b.What are the profit-maximizing price and quantity for Velvet Touches?
c.Is the firm making a profit or a loss? How much is the profit or loss? Show your work.
d.Is this firm operating in the long run or in the short run? Explain your answer.
e.If the firm's profit or loss is typical of all firms in the market for throw pillows, what is likely to happen in the future? Will there be more firms or will some existing firms leave the industry? Explain your answer.
f.What will happen to the typical firm's profit or loss after all entry/exit adjustments?

Accepted Answer

a.
 @#IMG-DLM& 
b.Q = 5; P = $22
c.Profit = $(110

Question 6

Figure 13-13
  
-Refer to Figure 13-13.If the diagram represents a typical firm in the 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) New firms will enter the market causing the demand to decrease for existing firms. 
C) Inefficient firms will exit the market and new cost-efficient firms will enter the market. 
D) Competition will be intensified as firms strive to make long-run profits. 
A) Some firms will exit the market causing the demand to increase for firms remaining in the market. 
B) New firms will enter the market causing the demand to decrease for existing firms. 
C) Inefficient firms will exit the market and new cost-efficient firms will enter the market. 
D) Competition will be intensified as firms strive to make long-run profits.

Question 7

Figure 13-3
  
-Refer to Figure 13-3.What is the marginal revenue of the sixth unit of output?

Accepted Answer

A) $4 
B) $5 
C) $9 
D) $54 
A) $4 
B) $5 
C) $9 
D) $54

Question 8

A major difference between monopolistic competition and perfect competition is

Accepted Answer

A) the number of sellers in the markets. 
B) the degree by which the market demand curves slope downwards. 
C) that products are not standardized in monopolistic competition unlike in perfect competition. 
D) the barriers to entry in the two markets. 
A) the number of sellers in the markets. 
B) the degree by which the market demand curves slope downwards. 
C) that products are not standardized in monopolistic competition unlike in perfect competition. 
D) the barriers to entry in the two markets.

Question 9

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

Accepted Answer

A) True 
 B)False

Question 10

Which of the following statements is true?

Accepted Answer

A) The marginal revenue of a monopolistically competitive firm will be positive at high prices and negative at low prices. 
B) Because the demand curve for a monopolistically competitive firm is downward-sloping its marginal revenue will be negative. 
C) The marginal revenue of a monopolistically competitive firm will be always be positive. 
D) The marginal revenue of a monopolistically competitive firm will be positive at low prices and negative at high prices. 
A) The marginal revenue of a monopolistically competitive firm will be positive at high prices and negative at low prices. 
B) Because the demand curve for a monopolistically competitive firm is downward-sloping its marginal revenue will be negative. 
C) The marginal revenue of a monopolistically competitive firm will be always be positive. 
D) The marginal revenue of a monopolistically competitive firm will be positive at low prices and negative at high prices.

Question 11

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 12

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 13

Sparkle, one of many firms in the market for toothpaste, is in long-run equilibrium.Sparkle has a small market share and 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 14

A monopolistically competitive firm that earns economic profits in the short run will face a more elastic demand curve in the long run.

Accepted Answer

A) True 
 B)False

Question 15

Which of the following is the best example of a firm that competes in a monopolistically competitive market?

Accepted Answer

A) the U.S. Postal Service 
B) Microsoft 
C) a movie theater 
D) an automobile manufacturer 
A) the U.S. Postal Service 
B) Microsoft 
C) a movie theater 
D) an automobile manufacturer

Question 16

What is the difference between zero accounting profit and zero economic profit?

Accepted Answer

Economic profits take into account oppor

Question 17

What is meant by "excess capacity"? How does it relate to consumer utility?

Accepted Answer

Excess capacity refers to a situation wh

Question 18

Although advertising raises the price of a monopolistic competitor's product, it does confer a benefit to consumers.Which of the following is a benefit to consumers?

Accepted Answer

A) Advertising acts as a barrier to entry. 
B) Advertising engenders brand loyalty. 
C) Advertising could provide consumers with useful information about new products and enable them to comparison shop. 
D) Advertised products tend to be of higher quality so consumers feel special when they consume advertised products. 
A) Advertising acts as a barrier to entry. 
B) Advertising engenders brand loyalty. 
C) Advertising could provide consumers with useful information about new products and enable them to comparison shop. 
D) Advertised products tend to be of higher quality so consumers feel special when they consume advertised products.

Question 19

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 20

Brand management refers to

Accepted Answer

A) picking a brand name for a new product that will attract attention. 
B) the efforts to maintain the differentiation of a product over time. 
C) efforts to reduce the cost of production. 
D) selling the right to use a brand name in a particular market. 
A) picking a brand name for a new product that will attract attention. 
B) the efforts to maintain the differentiation of a product over time. 
C) efforts to reduce the cost of production. 
D) selling the right to use a brand name in a particular market.

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

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

Suppose a monopolistically competitive firm's output where marginal revenue equals marginal cost is 66 units and the price corresponding to this quantity is $18.If the average total cost at this output is $16.55, then its total profit is

The Jeans Store sells 7 pairs of jeans per day when it charges $100 per pair.It sells 8 pairs of jeans per day at a price of $90 per pair.The marginal revenue of the eighth pair of jeans is

Figure 13-13 -Refer to Figure 13-13.If the diagram represents a typical firm in the market, what is likely to happen in the long run?

Figure 13-3 -Refer to Figure 13-3.What is the marginal revenue of the sixth unit of output?

A major difference between monopolistic competition and perfect competition is

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

Which of the following statements is true?

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

In monopolistic competition there is/are

A monopolistically competitive firm that earns economic profits in the short run will face a more elastic demand curve in the long run.

Which of the following is the best example of a firm that competes in a monopolistically competitive market?

What is the difference between zero accounting profit and zero economic profit?

What is meant by "excess capacity"? How does it relate to consumer utility?

Although advertising raises the price of a monopolistic competitor's product, it does confer a benefit to consumers.Which of the following is a benefit to consumers?

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.

Brand management refers to

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 More Realistic Setting

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

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

Suppose a monopolistically competitive firm's output where marginal revenue equals marginal cost is 66 units and the price corresponding to this quantity is $18.If the average total cost at this output is $16.55, then its total profit is

The Jeans Store sells 7 pairs of jeans per day when it charges $100 per pair.It sells 8 pairs of jeans per day at a price of $90 per pair.The marginal revenue of the eighth pair of jeans is

Figure 13-13 -Refer to Figure 13-13.If the diagram represents a typical firm in the market, what is likely to happen in the long run?

Figure 13-3 -Refer to Figure 13-3.What is the marginal revenue of the sixth unit of output?

A major difference between monopolistic competition and perfect competition is

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

Which of the following statements is true?

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

In monopolistic competition there is/are

A monopolistically competitive firm that earns economic profits in the short run will face a more elastic demand curve in the long run.

Which of the following is the best example of a firm that competes in a monopolistically competitive market?

What is the difference between zero accounting profit and zero economic profit?

What is meant by "excess capacity"? How does it relate to consumer utility?

Although advertising raises the price of a monopolistic competitor's product, it does confer a benefit to consumers.Which of the following is a benefit to consumers?

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.

Brand management refers to

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