Question 1

Monopolistic competition is defined as a type of market structure in which

Accepted Answer

A) many firms produce the good. 
B) firms produce a homogeneous good. 
C) there are barriers to entry. 
D) firms can make an economic profit in the long run. 
E) firms can easily enter the market but cannot easily exit from it. 
A) many firms produce the good. 
B) firms produce a homogeneous good. 
C) there are barriers to entry. 
D) firms can make an economic profit in the long run. 
E) firms can easily enter the market but cannot easily exit from it. A

Question 2

-The above figure shows a restaurant engaged in monopolistic competition with other restaurants.The equilibrium price at this restaurant is ________ per meal.

Accepted Answer

A) $20 
B) $30 
C) $50 
D) less than $20 
E) more than $50 
A) $20 
B) $30 
C) $50 
D) less than $20 
E) more than $50 C

Question 3

What does monopolistic competition have in common with monopoly?

Accepted Answer

A) a large number of firms 
B) a downward-sloping demand curve 
C) the ability to collude with respect to price 
D) mutual interdependence 
E) barriers to entry 
A) a large number of firms 
B) a downward-sloping demand curve 
C) the ability to collude with respect to price 
D) mutual interdependence 
E) barriers to entry B

Question 4

A firm in monopolistic competition makes its decisions on quantity and price by

Accepted Answer

A) taking price as given from the market and producing where MR = MC. 
B) taking both price and quantity as given from the market. 
C) producing where MR = MC and setting the price for this quantity from the demand curve. 
D) taking quantity as given from the market and setting the price for this quantity from the demand curve. 
E) producing where MR = MC and setting the price so that P = MR = MC. 
A) taking price as given from the market and producing where MR = MC. 
B) taking both price and quantity as given from the market. 
C) producing where MR = MC and setting the price for this quantity from the demand curve. 
D) taking quantity as given from the market and setting the price for this quantity from the demand curve. 
E) producing where MR = MC and setting the price so that P = MR = MC.

Question 5

Which of the following four-firm concentration ratios is consistent with monopolistic competition?

Accepted Answer

A) 100 percent 
B) 75 percent 
C) 25 percent 
D) 0 percent 
E) 91 percent 
A) 100 percent 
B) 75 percent 
C) 25 percent 
D) 0 percent 
E) 91 percent

Question 6

In the long run, firms in monopolistic competition produce at a level that is ________ the efficient scale of output.

Accepted Answer

A) less than 
B) equal to 
C) more than 
D) not comparable to 
E) All of the above are possible depending on market conditions. 
A) less than 
B) equal to 
C) more than 
D) not comparable to 
E) All of the above are possible depending on market conditions.

Question 7

A firm is spending the profit-maximizing amount on product development when

Accepted Answer

A) people perceive the firm's product to be better than those of its competitors. 
B) the marginal cost of product development is equal to the marginal revenue from product development. 
C) the price of the good is higher than its marginal cost. 
D) the advertising costs are covered. 
E) the firm's total revenue exceeds its total costs. 
A) people perceive the firm's product to be better than those of its competitors. 
B) the marginal cost of product development is equal to the marginal revenue from product development. 
C) the price of the good is higher than its marginal cost. 
D) the advertising costs are covered. 
E) the firm's total revenue exceeds its total costs.

Question 8

The Herfindahl-Hirschman Index measures market concentration in an industry by summing the square of the percentage market shares for

Accepted Answer

A) the 4 largest firms. 
B) the 50 smallest firms. 
C) the 4 smallest firms. 
D) the 50 largest firms. 
E) all firms in the market. 
A) the 4 largest firms. 
B) the 50 smallest firms. 
C) the 4 smallest firms. 
D) the 50 largest firms. 
E) all firms in the market.

Question 9

A firm's efficient scale of production is the output at which its

Accepted Answer

A) marginal cost is at a minimum. 
B) average total cost is at a minimum. 
C) profit is maximized. 
D) marginal revenue is at a maximum. 
E) marginal revenue equals marginal cost. 
A) marginal cost is at a minimum. 
B) average total cost is at a minimum. 
C) profit is maximized. 
D) marginal revenue is at a maximum. 
E) marginal revenue equals marginal cost.

Question 10

A firm in monopolistic competition has a ________ market share and ________ influence the price of its good or service.

Accepted Answer

A) large; can 
B) large; cannot 
C) small; can 
D) small; cannot 
E) large; might be able to 
A) large; can 
B) large; cannot 
C) small; can 
D) small; cannot 
E) large; might be able to

Question 11

Which of the following statements about product development in monopolistic competition is correct?
I∙Firms in monopolistic competition undertake too much product development for efficiency.
Ii∙Firms in monopolistic competition undertake too little product development for efficiency.
Iii∙Product development might allow the firm to make a temporary economic profit.

Accepted Answer

A) i only 
B) ii only 
C) ii and iii 
D) i and iii 
E) iii only 
A) i only 
B) ii only 
C) ii and iii 
D) i and iii 
E) iii only

Question 12

For a firm in monopolistic competition, innovation and product development are

Accepted Answer

A) senseless because economic profit is always zero in the long run. 
B) necessary in order to have a chance of making at least a short-run economic profit. 
C) inconsequential because each firm produces a different product. 
D) necessary to allow new firms to enter. 
E) uncommon because other firms already produce similar products. 
A) senseless because economic profit is always zero in the long run. 
B) necessary in order to have a chance of making at least a short-run economic profit. 
C) inconsequential because each firm produces a different product. 
D) necessary to allow new firms to enter. 
E) uncommon because other firms already produce similar products.

Question 13

When firms in monopolistic competition incur an economic loss, some firms will

Accepted Answer

A) enter the industry and produce more products. 
B) exit the industry, and demand will increase for the firms that remain. 
C) exit the industry, and demand will decrease for the firms that remain. 
D) enter the industry, and demand will become more elastic for the original firms. 
E) exit the industry and other firms will enter. 
A) enter the industry and produce more products. 
B) exit the industry, and demand will increase for the firms that remain. 
C) exit the industry, and demand will decrease for the firms that remain. 
D) enter the industry, and demand will become more elastic for the original firms. 
E) exit the industry and other firms will enter.

Question 14

If a large number of firms are competing, the market could be

Accepted Answer

A) perfect competition or monopolistic competition. 
B) perfect competition or monopoly. 
C) monopolistic competition or oligopoly. 
D) monopolistic competition or monopoly. 
E) oligopoly or monopoly. 
A) perfect competition or monopolistic competition. 
B) perfect competition or monopoly. 
C) monopolistic competition or oligopoly. 
D) monopolistic competition or monopoly. 
E) oligopoly or monopoly.

Question 15

List four characteristics of monopolistic competition.

Accepted Answer

There are a large number firms; each pro

Question 16

The decision to innovate

Accepted Answer

A) depends on the marketing department's needs. 
B) depends on whether the firm wants to benefit its customers. 
C) is based on the marginal cost and the marginal revenue of innovation. 
D) is unnecessary in a monopolistically competitive market. 
E) None of the above answers is correct. 
A) depends on the marketing department's needs. 
B) depends on whether the firm wants to benefit its customers. 
C) is based on the marginal cost and the marginal revenue of innovation. 
D) is unnecessary in a monopolistically competitive market. 
E) None of the above answers is correct.

Question 17

If firms in monopolistic competition are making economic profits, eventually

Accepted Answer

A) they shut down. 
B) they exit the industry. 
C) the market turns into a monopoly. 
D) new firms enter the industry. 
E) the firms in the market increase their production so that their economic profit disappears. 
A) they shut down. 
B) they exit the industry. 
C) the market turns into a monopoly. 
D) new firms enter the industry. 
E) the firms in the market increase their production so that their economic profit disappears.

Question 18

Product differentiation involves making a product that is

Accepted Answer

A) slightly different from the products of competing firms. 
B) no different than the products of competing firms. 
C) very different from the products of competing firms. 
D) completely different from the products of competing firms. 
E) cheaper than the products of competing firms. 
A) slightly different from the products of competing firms. 
B) no different than the products of competing firms. 
C) very different from the products of competing firms. 
D) completely different from the products of competing firms. 
E) cheaper than the products of competing firms.

Question 19

The absence of barriers to entry in monopolistic competition means that in the long run firms

Accepted Answer

A) make an economic profit. 
B) make zero economic profit. 
C) incur an economic loss. 
D) make either an economic profit or zero economic profit. 
E) make either zero economic profit or incur an economic loss. 
A) make an economic profit. 
B) make zero economic profit. 
C) incur an economic loss. 
D) make either an economic profit or zero economic profit. 
E) make either zero economic profit or incur an economic loss.

Question 20

In monopolistic competition there

Accepted Answer

A) are many firms and many buyers. 
B) are several large firms. 
C) is one large firm. 
D) might be many, several, or one firm. 
E) are many firms but only a few buyers. 
A) are many firms and many buyers. 
B) are several large firms. 
C) is one large firm. 
D) might be many, several, or one firm. 
E) are many firms but only a few buyers.

Monopolistic competition is defined as a type of market structure in which

-The above figure shows a restaurant engaged in monopolistic competition with other restaurants.The equilibrium price at this restaurant is ________ per meal.

What does monopolistic competition have in common with monopoly?

A firm in monopolistic competition makes its decisions on quantity and price by

Which of the following four-firm concentration ratios is consistent with monopolistic competition?

In the long run, firms in monopolistic competition produce at a level that is ________ the efficient scale of output.

A firm is spending the profit-maximizing amount on product development when

The Herfindahl-Hirschman Index measures market concentration in an industry by summing the square of the percentage market shares for

A firm's efficient scale of production is the output at which its

A firm in monopolistic competition has a market share and influence the price of its good or service.

For a firm in monopolistic competition, innovation and product development are

When firms in monopolistic competition incur an economic loss, some firms will

If a large number of firms are competing, the market could be

List four characteristics of monopolistic competition.

The decision to innovate

If firms in monopolistic competition are making economic profits, eventually

Product differentiation involves making a product that is

The absence of barriers to entry in monopolistic competition means that in the long run firms

In monopolistic competition there

Getting Started

The Usand Global Economies

The Economic Problem

Demand and Supply

Elasticities of Demand and Supply

Efficiency and Fairness of Markets

Government Actions in Markets

Taxes

Global Markets in Action

Externalities

Public Goods and Common Resources

Markets With Private Information

Consumer Choice and Demand

Production and Cost

Perfect Competition

Monopoly

Oligopoly

Markets for Factors of Production

Economic Inequality

Filters

Exam 17: Monopolistic Competition

Monopolistic competition is defined as a type of market structure in which

-The above figure shows a restaurant engaged in monopolistic competition with other restaurants.The equilibrium price at this restaurant is ________ per meal.

What does monopolistic competition have in common with monopoly?

A firm in monopolistic competition makes its decisions on quantity and price by

Which of the following four-firm concentration ratios is consistent with monopolistic competition?

In the long run, firms in monopolistic competition produce at a level that is ________ the efficient scale of output.

A firm is spending the profit-maximizing amount on product development when

The Herfindahl-Hirschman Index measures market concentration in an industry by summing the square of the percentage market shares for

A firm's efficient scale of production is the output at which its

A firm in monopolistic competition has a ________ market share and ________ influence the price of its good or service.

For a firm in monopolistic competition, innovation and product development are

When firms in monopolistic competition incur an economic loss, some firms will

If a large number of firms are competing, the market could be

List four characteristics of monopolistic competition.

The decision to innovate

If firms in monopolistic competition are making economic profits, eventually

Product differentiation involves making a product that is

The absence of barriers to entry in monopolistic competition means that in the long run firms

In monopolistic competition there

Getting Started

The Usand Global Economies

The Economic Problem

Demand and Supply

Elasticities of Demand and Supply

Efficiency and Fairness of Markets

Government Actions in Markets

Taxes

Global Markets in Action

Externalities

Public Goods and Common Resources

Markets With Private Information

Consumer Choice and Demand

Production and Cost

Perfect Competition

Monopoly

Oligopoly

Markets for Factors of Production

Economic Inequality

Filters

A firm in monopolistic competition has a market share and influence the price of its good or service.