Question 1

A firm that successfully differentiates its product or lowers its average cost of production creates

Accepted Answer

A) value for its customers. 
B) entry barriers into its market. 
C) a perfectly inelastic demand curve for its product. 
D) economies of scale. 
A) value for its customers. 
B) entry barriers into its market. 
C) a perfectly inelastic demand curve for its product. 
D) economies of scale.

Question 2

Figure 13-17
  
-Refer to Figure 13-17.What is the allocatively efficient output for the firm represented in the diagram?

Accepted Answer

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

Question 3

Suppose a monopolistically competitive firm sells 25 units at a price of $10.Calculate its marginal revenue per unit of output if it sells 5 more units of output when it reduced its price to $9.

Accepted Answer

A) $270 
B) $20 
C) $4 
D) $2.50 
A) $270 
B) $20 
C) $4 
D) $2.50

Question 4

Figure 13-13
  
-Refer to Figure 13-13.What is the profit maximizing output level?

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 5

What is the trade-off that consumers face when buying the product of a monopolistically competitive firm?

Accepted Answer

A) Consumers pay higher prices but receive better quality goods compared to the output of perfectly competitive firms. 
B) Consumers pay a price greater than marginal cost, but have the luxury of choices more suited to their tastes. 
C) Consumers pay higher prices but the products are produced by highly efficient firms. 
D) Consumers pay lower prices but have fewer choices. 
A) Consumers pay higher prices but receive better quality goods compared to the output of perfectly competitive firms. 
B) Consumers pay a price greater than marginal cost, but have the luxury of choices more suited to their tastes. 
C) Consumers pay higher prices but the products are produced by highly efficient firms. 
D) Consumers pay lower prices but have fewer choices.

Question 6

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 7

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.Fill in the columns for TR, MR, MC, ATC, and profit.If Central Grocery wants to maximize profits, what price should it charge for a muffaletta, what quantity should it sell, and what will be the amount of its total profit?

Accepted Answer

@#IMG-DLM& To maximize profits, Central

Question 8

When a monopolistically competitive firm lowers it price one bad thing happens to the firm.What is this "one bad thing" called?

Accepted Answer

A) the output effect 
B) the income effect 
C) the substitution effect 
D) the price effect 
A) the output effect 
B) the income effect 
C) the substitution effect 
D) the price effect

Question 9

When a monopolistically competitive firm breaks even in the long run, this is equivalent to earning a zero accounting profit.

Accepted Answer

A) True 
 B)False

Question 10

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 11

Economists have long debated whether there is a significant loss of well-being to society in markets that are monopolistically competitive rather than perfectly competitive.Which of the following offers the best reason why some economists believe that monopolistically competitive markets are less efficient than perfectly competitive markets?

Accepted Answer

A) In contrast to perfectly competitive markets, neither allocative efficiency nor productive efficiency are achieved in monopolistically competitive markets. 
B) In contrast to perfectly competitive markets, firms in monopolistically competitive markets earn economic profits in long-run equilibrium. 
C) In contrast to perfectly competitive markets, firms in monopolistically competitive markets do not produce where price equals average total cost in long-run equilibrium. 
D) In contrast to perfectly competitive markets, firms in monopolistically competitive markets can charge a price greater than average total cost in the short run. 
A) In contrast to perfectly competitive markets, neither allocative efficiency nor productive efficiency are achieved in monopolistically competitive markets. 
B) In contrast to perfectly competitive markets, firms in monopolistically competitive markets earn economic profits in long-run equilibrium. 
C) In contrast to perfectly competitive markets, firms in monopolistically competitive markets do not produce where price equals average total cost in long-run equilibrium. 
D) In contrast to perfectly competitive markets, firms in monopolistically competitive markets can charge a price greater than average total cost in the short run.

Question 12

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 13

Figure 13-8
   
Figure 13-8 shows cost and demand curves for a monopolistically competitive producer of iced tea.
-Refer to Figure 13-8.At the profit-maximizing output level the firm will

Accepted Answer

A) earn a profit of $176. 
B) break even. 
C) earn a profit of $88. 
D) earn a profit of $60. 
A) earn a profit of $176. 
B) break even. 
C) earn a profit of $88. 
D) earn a profit of $60.

Question 14

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 Eco Energy's profit?

Accepted Answer

A) $125 
B) $140 
C) $145 
D) $150 
A) $125 
B) $140 
C) $145 
D) $150

Question 15

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 16

Figure 13-16
  
-Refer to Figure 13-16.Figure 13-16 depicts a monopolistically competitive barber shop.Use the diagram to answer the following questions.
a.Suppose the average variable cost of production is $15 when output equals 110 haircuts and $15.25 when output equals 140 haircuts.If the firm wants to maximize its profit or minimize its losses, how many haircuts will it produce and what price should it charge? Explain your answer.
b.Calculate the firm's profit or loss.
c.What is likely to happen in this industry over time as it moves to its new long-run equilibrium?
d.Suppose the barber shop depicted in the diagram remains in the industry.Is this barber shop likely to produce this same quantity of haircuts as in part (a)in the long run?

Accepted Answer

a.Output = 110, Price = $21 whereby MR =

Question 17

One of your classmates asserts that advertising, marketing research, and brand management are redundant expenditures because a firm can obtain the same information by simply looking at what customers are already buying.Which of the following is not a response you might offer her?

Accepted Answer

A) Conducting market research is a good way for firms to keep abreast of changing consumer tastes and preferences. 
B) Advertising and brand management allow a firm to create an entry barrier which will insulate the firm from competition and from undertaking further product innovations. 
C) Marketing research could allow a firm to identify new market opportunities and at least, in the short run, a firm can make a profit supplying products to this market segment. 
D) If a firm successfully manages its brand, customers become less price sensitive as they perceive fewer substitutes for the firm's brand. 
A) Conducting market research is a good way for firms to keep abreast of changing consumer tastes and preferences. 
B) Advertising and brand management allow a firm to create an entry barrier which will insulate the firm from competition and from undertaking further product innovations. 
C) Marketing research could allow a firm to identify new market opportunities and at least, in the short run, a firm can make a profit supplying products to this market segment. 
D) If a firm successfully manages its brand, customers become less price sensitive as they perceive fewer substitutes for the firm's brand.

Question 18

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 19

For a monopolistically competitive firm, marginal revenue

Accepted Answer

A) equals the price. 
B) is greater than the price. 
C) is less than the price. 
D) and price are unrelated. 
A) equals the price. 
B) is greater than the price. 
C) is less than the price. 
D) and price are unrelated.

Question 20

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.

A firm that successfully differentiates its product or lowers its average cost of production creates

Figure 13-17 -Refer to Figure 13-17.What is the allocatively efficient output for the firm represented in the diagram?

Suppose a monopolistically competitive firm sells 25 units at a price of $10.Calculate its marginal revenue per unit of output if it sells 5 more units of output when it reduced its price to $9.

Figure 13-13 -Refer to Figure 13-13.What is the profit maximizing output level?

What is the trade-off that consumers face when buying the product of a monopolistically competitive firm?

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

When a monopolistically competitive firm lowers it price one bad thing happens to the firm.What is this "one bad thing" called?

When a monopolistically competitive firm breaks even in the long run, this is equivalent to earning a zero accounting profit.

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

Figure 13-8 Figure 13-8 shows cost and demand curves for a monopolistically competitive producer of iced tea. -Refer to Figure 13-8.At the profit-maximizing output level the firm will

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 Eco Energy's profit?

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

One of your classmates asserts that advertising, marketing research, and brand management are redundant expenditures because a firm can obtain the same information by simply looking at what customers are already buying.Which of the following is not a response you might offer her?

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?

For a monopolistically competitive firm, marginal revenue

In both monopolistically competitive and perfectly competitive industries

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

A firm that successfully differentiates its product or lowers its average cost of production creates

Figure 13-17 -Refer to Figure 13-17.What is the allocatively efficient output for the firm represented in the diagram?

Suppose a monopolistically competitive firm sells 25 units at a price of $10.Calculate its marginal revenue per unit of output if it sells 5 more units of output when it reduced its price to $9.

Figure 13-13 -Refer to Figure 13-13.What is the profit maximizing output level?

What is the trade-off that consumers face when buying the product of a monopolistically competitive firm?

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

When a monopolistically competitive firm lowers it price one bad thing happens to the firm.What is this "one bad thing" called?

When a monopolistically competitive firm breaks even in the long run, this is equivalent to earning a zero accounting profit.

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

Figure 13-8 Figure 13-8 shows cost and demand curves for a monopolistically competitive producer of iced tea. -Refer to Figure 13-8.At the profit-maximizing output level the firm will

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 Eco Energy's profit?

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

One of your classmates asserts that advertising, marketing research, and brand management are redundant expenditures because a firm can obtain the same information by simply looking at what customers are already buying.Which of the following is not a response you might offer her?

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?

For a monopolistically competitive firm, marginal revenue

In both monopolistically competitive and perfectly competitive industries

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