Question 1

How do consumers benefit from monopolistic competition?

Accepted Answer

A) By being able to choose from products more closely suited to their tastes. 
B) By paying the lowest possible price for the product. 
C) By paying the same price as everyone else. 
D) By being able to purchase high-quality products at low prices. 
A) By being able to choose from products more closely suited to their tastes. 
B) By paying the lowest possible price for the product. 
C) By paying the same price as everyone else. 
D) By being able to purchase high-quality products at low prices.

Question 2

Monopolistically competitive firms face a perfectly elastic demand curve.

Accepted Answer

A) True 
 B)False

Question 3

A franchise is

Accepted Answer

A) a firm that buys and operates a brand name business in a new market. 
B) a firm with the legal right to sell a good or service in a particular area. 
C) a firm with no competitors. 
D) a branch of a national company. 
A) a firm that buys and operates a brand name business in a new market. 
B) a firm with the legal right to sell a good or service in a particular area. 
C) a firm with no competitors. 
D) a branch of a national company.

Question 4

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 5

Figure 10.10   Figure 10.10 shows cost and demand curves for a monopolistically competitive producer of iced tea.
-Refer to Figure 10.10.to answer the following questions.
a.What is the profit-maximising output level?
b.What is the profit-maximising price?
c.At the profit-maximising output level, how much profit will be realised?
d.Does this graph most likely represent the long run or the short run? Why?
__________________________________________________________________________________________________________________________________________________________________________________________

Accepted Answer

a.The profit-maximising output

Question 6

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, its total profit is

Accepted Answer

A) $1188. 
B) $1092.30. 
C) $95.70. 
D) $1.45. 
A) $1188. 
B) $1092.30. 
C) $95.70. 
D) $1.45.

Question 7

Figure 10.8   Figure 10.8 shows cost and demand curves for a monopolistically competitive producer of iced tea.
-Refer to Figure 10.8.The profit-maximising output level is

Accepted Answer

A) 22 cases 
B) 24 cases 
C) 30 cases 
D) 38 cases 
A) 22 cases 
B) 24 cases 
C) 30 cases 
D) 38 cases

Question 8

In the long run, if price is less than average cost

Accepted Answer

A) there is an incentive for firms to exit the market. 
B) there is profit incentive for firms to enter the market. 
C) the market must be in long-run equilibrium. 
D) there is no incentive for the number of firms in the market to change. 
A) there is an incentive for firms to exit the market. 
B) there is profit incentive for firms to enter the market. 
C) the market must be in long-run equilibrium. 
D) there is no incentive for the number of firms in the market to change.

Question 9

Table 10.2   Eco Energy is a monopolistically competitive producer of a sports beverage called Power On.Table 10.2 shows the firm's demand and cost schedules.
-Refer to Table 10.2.Eco Energy's profit is

Accepted Answer

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

Question 10

Table 10.4   Table 10.4 lists estimated revenues and costs (per week)for plastic vials (100 vials per box)for the Victoria Biological Supplies Company.Victoria sells plastic vials to university and private research laboratories.
-Refer to Table 10.4.What is true at Victoria's profit-maximising output?

Accepted Answer

A) Profit equals $2. 
B) Total revenue equals $24 and total cost equals $20. 
C) Total revenue equals $25 and total cost equals $22. 
D) Total revenue equals $21 and total cost equals $17. 
A) Profit equals $2. 
B) Total revenue equals $24 and total cost equals $20. 
C) Total revenue equals $25 and total cost equals $22. 
D) Total revenue equals $21 and total cost equals $17.

Question 11

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 12

Assume price exceeds average variable cost over the relevant range of demand.If a monopolistically competitive firm is producing at an output where marginal revenue is $23 and marginal cost is $19, then to maximise profits the firm should

Accepted Answer

A) continue to produce the same quantity. 
B) increase output. 
C) decrease output. 
D) shut down. 
A) continue to produce the same quantity. 
B) increase output. 
C) decrease output. 
D) shut down.

Question 13

New firms are able to enter monopolistically competitive markets because there are low barriers to entry.

Accepted Answer

A) True 
 B)False

Question 14

A monopolistically competitive firm maximises profit where

Accepted Answer

A) price = marginal revenue. 
B) price > marginal cost. 
C) marginal revenue > average revenue. 
D) total revenue > marginal cost. 
A) price = marginal revenue. 
B) price > marginal cost. 
C) marginal revenue > average revenue. 
D) total revenue > marginal cost.

Question 15

It is true in both monopolistically competitive and perfectly competitive industries that

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.

Question 16

Explain the similarities and differences between the long-run equilibrium for a perfectly competitive firm and a monopolistically competitive firm.Illustrate your answer with a graph demonstrating the long-run equilibrium for the two types of firms.
__________________________________________________________________________________________________________________________________________________________________________________________

Accepted Answer

@#IMG-DLM& Refer to the graph above.For both types

Question 17

Figure 10.12  
-Refer to Figure 10.12.The amount of excess capacity is

Accepted Answer

A) Q4 - Q3 units 
B) Q4 - Q2 units 
C) Q3 - Q2 units 
D) Q3 - Q1 units 
A) Q4 - Q3 units 
B) Q4 - Q2 units 
C) Q3 - Q2 units 
D) Q3 - Q1 units

Question 18

Figure 10.14  
-Refer to Figure 10.14.The output price is

Accepted Answer

A) P4 
B) P3 
C) P2 
D) P1 
A) P4 
B) P3 
C) P2 
D) P1

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

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

How do consumers benefit from monopolistic competition?

Monopolistically competitive firms face a perfectly elastic demand curve.

A franchise is

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?

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, its total profit is

Figure 10.8 Figure 10.8 shows cost and demand curves for a monopolistically competitive producer of iced tea. -Refer to Figure 10.8.The profit-maximising output level is

In the long run, if price is less than average cost

Table 10.2 Eco Energy is a monopolistically competitive producer of a sports beverage called Power On.Table 10.2 shows the firm's demand and cost schedules. -Refer to Table 10.2.Eco Energy's profit is

Table 10.4 Table 10.4 lists estimated revenues and costs (per week)for plastic vials (100 vials per box)for the Victoria Biological Supplies Company.Victoria sells plastic vials to university and private research laboratories. -Refer to Table 10.4.What is true at Victoria's profit-maximising output?

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

Assume price exceeds average variable cost over the relevant range of demand.If a monopolistically competitive firm is producing at an output where marginal revenue is $23 and marginal cost is $19, then to maximise profits the firm should

New firms are able to enter monopolistically competitive markets because there are low barriers to entry.

A monopolistically competitive firm maximises profit where

It is true in both monopolistically competitive and perfectly competitive industries that

Figure 10.12 -Refer to Figure 10.12.The amount of excess capacity is

Figure 10.14 -Refer to Figure 10.14.The output price is

For a monopolistically competitive firm, marginal revenue

Economics: Foundations and Models

Choices and Trade-Offs in the Market

Where Prices Come From: The Interaction of Demand and Supply

Elasticity: The Responsiveness of Demand and Supply

Economic Efficiency, Government Price Setting and Taxes

Consumer Choice and Behavioural Economics

Technology Production and Costs

Firms in Perfectly Competitive Markets

Monopoly Markets

Oligopoly: Markets With Few Competitors

The Markets for Labour and Other Factors of Production

Comparative Advantage and the Gains From International Trade

Government Intervention in the Market

Externalities, Environmental Policy and Public Goods

The Distribution of Income and Social Policy

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Exam 10: Monopolistic Competition: The Competitive Model in a More Realistic

How do consumers benefit from monopolistic competition?

Monopolistically competitive firms face a perfectly elastic demand curve.

A franchise is

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?

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, its total profit is

Figure 10.8 Figure 10.8 shows cost and demand curves for a monopolistically competitive producer of iced tea. -Refer to Figure 10.8.The profit-maximising output level is

In the long run, if price is less than average cost

Table 10.2 Eco Energy is a monopolistically competitive producer of a sports beverage called Power On.Table 10.2 shows the firm's demand and cost schedules. -Refer to Table 10.2.Eco Energy's profit is

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

Assume price exceeds average variable cost over the relevant range of demand.If a monopolistically competitive firm is producing at an output where marginal revenue is $23 and marginal cost is $19, then to maximise profits the firm should

New firms are able to enter monopolistically competitive markets because there are low barriers to entry.

A monopolistically competitive firm maximises profit where

It is true in both monopolistically competitive and perfectly competitive industries that

Figure 10.12 -Refer to Figure 10.12.The amount of excess capacity is

Figure 10.14 -Refer to Figure 10.14.The output price is

For a monopolistically competitive firm, marginal revenue

Economics: Foundations and Models

Choices and Trade-Offs in the Market

Where Prices Come From: The Interaction of Demand and Supply

Elasticity: The Responsiveness of Demand and Supply

Economic Efficiency, Government Price Setting and Taxes

Consumer Choice and Behavioural Economics

Technology Production and Costs

Firms in Perfectly Competitive Markets

Monopoly Markets

Oligopoly: Markets With Few Competitors

The Markets for Labour and Other Factors of Production

Comparative Advantage and the Gains From International Trade

Government Intervention in the Market

Externalities, Environmental Policy and Public Goods

The Distribution of Income and Social Policy

Filters