Question 1

The entry and exit of firms in a monopolistically competitive market guarantee that

Accepted Answer

A) marginal revenue equals marginal cost and average total cost is minimized. 
B) firms can earn economic profits in the long run. 
C) price equals average total cost in the long run. 
D) firms can earn economic profits in the short run. 
A) marginal revenue equals marginal cost and average total cost is minimized. 
B) firms can earn economic profits in the long run. 
C) price equals average total cost in the long run. 
D) firms can earn economic profits in the short run.

Question 2

Why would an organization as large as the National Football League (NFL)incur large legal expenses to try to prevent bars and restaurants from using their trademarked term "Super Bowl" in their advertising?

Accepted Answer

The National Football League has spent a

Question 3

When a monopolistically competitive firm cuts its price to increase its sales, it experiences a gain in revenue due to the

Accepted Answer

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

Question 4

Figure 13-4
   
Figure 13-4 shows short-run cost and demand curves for a monopolistically competitive firm in the market for designer watches.
-Refer to Figure 13-4.Should the firm represented in the diagram continue to stay in business despite its losses?

Accepted Answer

A) No, it should shut down. 
B) Yes, its total revenue covers its variable cost. 
C) No, it is not able to cover its fixed cost. 
D) Yes, it should increase its revenue by raising its price. 
A) No, it should shut down. 
B) Yes, its total revenue covers its variable cost. 
C) No, it is not able to cover its fixed cost. 
D) Yes, it should increase its revenue by raising its price.

Question 5

Figure 13-19
  
-Refer to Figure 13-19 to answer the following questions.
a.What is the productively efficient output?
b.What is the allocatively efficient output?
c.What is the amount of excess capacity?
d.Suppose the firm is currently producing 14 units.What happens if it increases output to 17 units?

Accepted Answer

a.The productively efficient output is 2

Question 6

Figure 13-4
   
Figure 13-4 shows short-run cost and demand curves for a monopolistically competitive firm in the market for designer watches.
-Refer to Figure 13-4.What is the area that represents the total fixed cost of production?

Accepted Answer

A) 0P₁aQₐ 
B) P₀adP₃ 
C) P₁bdP₃ 
D) That information cannot be determined from the graph. 
A) 0P₁aQₐ 
B) P₀adP₃ 
C) P₁bdP₃ 
D) That information cannot be determined from the graph.

Question 7

Is a monopolistically competitive firm allocatively efficient?

Accepted Answer

A) No, because it does not produce at minimum average total cost. 
B) Yes, because it produces where marginal cost equals marginal revenue. 
C) No, because price is greater than marginal cost. 
D) Yes, because price equals average total cost. 
A) No, because it does not produce at minimum average total cost. 
B) Yes, because it produces where marginal cost equals marginal revenue. 
C) No, because price is greater than marginal cost. 
D) Yes, because price equals average total cost.

Question 8

In the long run, if the demand curve of a monopolistically competitive firm is tangent to its average total cost curve then

Accepted Answer

A) the firm would break even. 
B) the firm would shut down temporarily. 
C) the firm would earn enough revenue to cover its variable costs, but not its fixed costs. 
D) the firm would earn an economic profit. 
A) the firm would break even. 
B) the firm would shut down temporarily. 
C) the firm would earn enough revenue to cover its variable costs, but not its fixed costs. 
D) the firm would earn an economic profit.

Question 9

If a monopolistically competitive firm breaks even, the firm

Accepted Answer

A) is earning an accounting profit and will have to pay taxes on that profit. 
B) is earning zero accounting and zero economic profit. 
C) should advertise its product to stimulate demand. 
D) should expand production. 
A) is earning an accounting profit and will have to pay taxes on that profit. 
B) is earning zero accounting and zero economic profit. 
C) should advertise its product to stimulate demand. 
D) should expand production.

Question 10

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 11

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 12

When a firm faces a downward-sloping demand curve, marginal revenue

Accepted Answer

A) must exceed price because the price effect outweighs the output effect. 
B) is less than price because a firm must lower its price to sell more. 
C) equals price because the firm sells a standardized product. 
D) must exceed price because the output effect outweighs the price effect. 
A) must exceed price because the price effect outweighs the output effect. 
B) is less than price because a firm must lower its price to sell more. 
C) equals price because the firm sells a standardized product. 
D) must exceed price because the output effect outweighs the price effect.

Question 13

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 its 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.

Question 14

If a monopolistically competitive firm breaks even, the firm is earning as much in this industry as it could in any other comparable industry.

Accepted Answer

A) True 
 B)False

Question 15

Table 13-1
  
-Refer to Table 13-1.What portion of the marginal revenue of the 4th unit is due to the output effect and what portion is due to the price effect?

Accepted Answer

A) output effect = $24.00; price effect = $19.50 
B) output effect = $6.50; price effect = $2.00 
C) output effect = -$0.50; price effect = $5.00 
D) output effect = $6.00; price effect = -$1.50 
A) output effect = $24.00; price effect = $19.50 
B) output effect = $6.50; price effect = $2.00 
C) output effect = -$0.50; price effect = $5.00 
D) output effect = $6.00; price effect = -$1.50

Question 16

Which of the following is true of trademarks?

Accepted Answer

A) A successful trademark is one that becomes a generic name for a product, for example, "Xerox" has become a generic term for making photocopies. 
B) A successful trademark is one that allows consumers to immediately identify the source or producer of the product. 
C) If a firm is granted a trademark, then no other firms can legally produce similar products for a given period of time. 
D) If a firm is granted a trademark, then no other firms can legally sell in the same geographic area for a given period of time. 
A) A successful trademark is one that becomes a generic name for a product, for example, "Xerox" has become a generic term for making photocopies. 
B) A successful trademark is one that allows consumers to immediately identify the source or producer of the product. 
C) If a firm is granted a trademark, then no other firms can legally produce similar products for a given period of time. 
D) If a firm is granted a trademark, then no other firms can legally sell in the same geographic area for a given period of time.

Question 17

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 18

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

Accepted Answer

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

Question 19

Figure 13-10
   
Figure 13-10 shows cost and demand curves for a monopolistically competitive producer of iced tea.
-Refer to Figure 13-10.to answer the following questions.
a.What is the profit-maximizing output level?
b.What is the profit-maximizing price?
c.At the profit-maximizing output level, how much profit will be realized?
d.Does this graph most likely represent the long run or the short run? Why?

Accepted Answer

a.The profit-maximizing output

Question 20

If a firm can produce a product at a lower average cost than its competitors, it stands a better chance of earning economic profit.

Accepted Answer

A) True 
 B)False

The entry and exit of firms in a monopolistically competitive market guarantee that

Why would an organization as large as the National Football League (NFL)incur large legal expenses to try to prevent bars and restaurants from using their trademarked term "Super Bowl" in their advertising?

When a monopolistically competitive firm cuts its price to increase its sales, it experiences a gain in revenue due to the

Figure 13-4 Figure 13-4 shows short-run cost and demand curves for a monopolistically competitive firm in the market for designer watches. -Refer to Figure 13-4.Should the firm represented in the diagram continue to stay in business despite its losses?

Figure 13-4 Figure 13-4 shows short-run cost and demand curves for a monopolistically competitive firm in the market for designer watches. -Refer to Figure 13-4.What is the area that represents the total fixed cost of production?

Is a monopolistically competitive firm allocatively efficient?

In the long run, if the demand curve of a monopolistically competitive firm is tangent to its average total cost curve then

If a monopolistically competitive firm breaks even, the firm

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?

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

When a firm faces a downward-sloping demand curve, marginal revenue

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 its average cost of production?

If a monopolistically competitive firm breaks even, the firm is earning as much in this industry as it could in any other comparable industry.

Table 13-1 -Refer to Table 13-1.What portion of the marginal revenue of the 4th unit is due to the output effect and what portion is due to the price effect?

Which of the following is true of trademarks?

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

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

If a firm can produce a product at a lower average cost than its competitors, it stands a better chance of earning economic profit.

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

The entry and exit of firms in a monopolistically competitive market guarantee that

Why would an organization as large as the National Football League (NFL)incur large legal expenses to try to prevent bars and restaurants from using their trademarked term "Super Bowl" in their advertising?

When a monopolistically competitive firm cuts its price to increase its sales, it experiences a gain in revenue due to the

Figure 13-4 Figure 13-4 shows short-run cost and demand curves for a monopolistically competitive firm in the market for designer watches. -Refer to Figure 13-4.Should the firm represented in the diagram continue to stay in business despite its losses?

Figure 13-4 Figure 13-4 shows short-run cost and demand curves for a monopolistically competitive firm in the market for designer watches. -Refer to Figure 13-4.What is the area that represents the total fixed cost of production?

Is a monopolistically competitive firm allocatively efficient?

In the long run, if the demand curve of a monopolistically competitive firm is tangent to its average total cost curve then

If a monopolistically competitive firm breaks even, the firm

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?

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

When a firm faces a downward-sloping demand curve, marginal revenue

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 its average cost of production?

If a monopolistically competitive firm breaks even, the firm is earning as much in this industry as it could in any other comparable industry.

Table 13-1 -Refer to Table 13-1.What portion of the marginal revenue of the 4th unit is due to the output effect and what portion is due to the price effect?

Which of the following is true of trademarks?

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

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

If a firm can produce a product at a lower average cost than its competitors, it stands a better chance of earning economic profit.

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