Question 1

-Refer to Figure 10-15. Which of the following statements describes the firm depicted in the diagram?

Accepted Answer

A)  The firm is making no economic profit and will exit the industry. 
B)  The firm is suffering an economic loss by producing at Q0 but will break even it increases its output to Q1. 
C)  The firm achieves productive efficiency by producing at Q0. 
D)  The firm is in long-run equilibrium and is breaking even. 
A)  The firm is making no economic profit and will exit the industry. 
B)  The firm is suffering an economic loss by producing at Q0 but will break even it increases its output to Q1. 
C)  The firm achieves productive efficiency by producing at Q0. 
D)  The firm is in long-run equilibrium and is breaking even.

Question 2

A monopolistically competitive industry 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

-Refer to Table 10-2. What is the output (Q) that maximises profit, and what is the price (P) charged?

Accepted Answer

A)  P = $55; Q = 5 cases 
B)  P = $50; Q = 6 cases 
C)  P = $45; Q = 7 cases 
D)  P = $40; Q = 8 cases 
A)  P = $55; Q = 5 cases 
B)  P = $50; Q = 6 cases 
C)  P = $45; Q = 7 cases 
D)  P = $40; Q = 8 cases

Question 4

-Refer to Table 10-1. What is the marginal revenue of the 3rd unit?

Accepted Answer

A)  $6.50 
B)  $5.50 
C)  $1.83 
D)  $0.50 
A)  $6.50 
B)  $5.50 
C)  $1.83 
D)  $0.50

Question 5

-Refer to Figure 10-9. Which of the graphs in the figure depicts a monopolistically competitive firm that is earning economic profits?

Accepted Answer

A)  Panel A 
B)  Panel B 
C)  Panel C 
D)  Panel A and Panel B 
A)  Panel A 
B)  Panel B 
C)  Panel C 
D)  Panel A and Panel B

Question 6

Why are many companies concerned about brand management?

Accepted Answer

Firms are concerned about bran

Question 7

In a monopolistically competitive market, a successful new restaurant

Accepted Answer

A)  can earn economic profits in the long run if it uses barriers to restrict entry by new restaurants. 
B)  will earn zero economic profit in the long run because of free entry, but competition will lead restaurants to offer different versions of the same product. 
C)  will face high entry barriers because of health and safety regulations to which all restaurants are subject. 
D)  must obtain a trademark to ensure that it will break even in the long run. 
A)  can earn economic profits in the long run if it uses barriers to restrict entry by new restaurants. 
B)  will earn zero economic profit in the long run because of free entry, but competition will lead restaurants to offer different versions of the same product. 
C)  will face high entry barriers because of health and safety regulations to which all restaurants are subject. 
D)  must obtain a trademark to ensure that it will break even in the long run.

Question 8

You are planning to open a new Italian restaurant in your hometown where there are three other Italian restaurants. You plan to distinguish your restaurant from your competitors by offering northern Italian cuisine and using locally grown organic produce. What is likely to happen in the restaurant market in your hometown after you open?

Accepted Answer

A)  Your competitors are likely to change their menus to make their products more similar to yours. 
B)  The demand curve facing each restaurant owner shifts to the right. 
C)  The demand curve facing each restaurant owner becomes more elastic. 
D)  While the demand curves facing your competitors becomes more elastic, your demand curve will be inelastic. 
A)  Your competitors are likely to change their menus to make their products more similar to yours. 
B)  The demand curve facing each restaurant owner shifts to the right. 
C)  The demand curve facing each restaurant owner becomes more elastic. 
D)  While the demand curves facing your competitors becomes more elastic, your demand curve will be inelastic.

Question 9

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 10

Suppose Jason owns a small pastry shop. Jason wants to maximise his profit, and thinking back to the university microeconomics class he took, he decides he needs to produce a quantity of pastries which will minimise his average total cost. Will Jason's strategy necessarily maximise profits for his pastry shop?

Accepted Answer

A)  Yes; since Jason's pastry shop is in a perfectly competitive market, the only way to maximise profit is to produce the quantity where average total cost is minimised. 
B)  Not necessarily; this strategy will only maximise Jason's profit in the long run, but not in the short run. 
C)  No; in order to maximise profit, Jason would never want to produce the quantity where average total cost is minimised. 
D)  Not necessarily; depending on demand, Jason may maximise profit by producing a quantity other than that where average total cost is at a minimum. 
A)  Yes; since Jason's pastry shop is in a perfectly competitive market, the only way to maximise profit is to produce the quantity where average total cost is minimised. 
B)  Not necessarily; this strategy will only maximise Jason's profit in the long run, but not in the short run. 
C)  No; in order to maximise profit, Jason would never want to produce the quantity where average total cost is minimised. 
D)  Not necessarily; depending on demand, Jason may maximise profit by producing a quantity other than that where average total cost is at a minimum.

Question 11

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 12

In theory, in the long run, monopolistically competitive firms earns zero profits. However, in reality there are some ways by which a firm can avoid losing profits. Which of the following is one such way?

Accepted Answer

A)  gradually increase the markup on the goods produced 
B)  lower the price of its products to expand its market share 
C)  identify new markets and develop products precisely for those markets 
D)  find a market niche and keep it as narrow as possible so as to prevent other producers from entering this market segment 
A)  gradually increase the markup on the goods produced 
B)  lower the price of its products to expand its market share 
C)  identify new markets and develop products precisely for those markets 
D)  find a market niche and keep it as narrow as possible so as to prevent other producers from entering this market segment

Question 13

The profit-maximising rule for a monopolistically competitive firm is to select the quantity at which

Accepted Answer

A)  marginal revenue equals marginal cost. 
B)  average revenue exceeds marginal cost by the greatest amount. 
C)  price equals marginal cost. 
D)  average revenue equals average total cost. 
A)  marginal revenue equals marginal cost. 
B)  average revenue exceeds marginal cost by the greatest amount. 
C)  price equals marginal cost. 
D)  average revenue equals average total cost.

Question 14

-Refer to Figure 10-4. What is the area that represents the total variable cost of production?

Accepted Answer

A)  0P0aQa 
B)  0P1bQa 
C)  P0abP1 
D)  P1bdP3 
A)  0P0aQa 
B)  0P1bQa 
C)  P0abP1 
D)  P1bdP3

Question 15

When a monopolistically competitive firm cuts its price to increase its sales, it experiences a loss in revenue due to the income effect and a gain in revenue due to the substitution effect.

Accepted Answer

A) True 
 B)False

Question 16

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 17

A monopolistically competitive firm that earns an accounting profit in the short run

Accepted Answer

A)  must also earn an economic profit in the short run. 
B)  does not earn enough to earn an economic profit in the short run. 
C)  could earn an economic profit, break even or suffer an economic loss in the short run. 
D)  could earn an economic profit or break even, but could not suffer an economic loss in the short run. 
A)  must also earn an economic profit in the short run. 
B)  does not earn enough to earn an economic profit in the short run. 
C)  could earn an economic profit, break even or suffer an economic loss in the short run. 
D)  could earn an economic profit or break even, but could not suffer an economic loss in the short run.

Question 18

If buyers of a monopolistically competitive product feel the products of different sellers have few differences between them, then the demand for each seller's product is relatively elastic.

Accepted Answer

A) True 
 B)False

Question 19

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

Question 20

-Refer to Table 10-3. What is its average variable cost of production at its optimal output level?

Accepted Answer

A)  $0 (because its optimal output = 0) 
B)  $15 
C)  $14.75 
D)  $29 
A)  $0 (because its optimal output = 0) 
B)  $15 
C)  $14.75 
D)  $29

-Refer to Figure 10-15. Which of the following statements describes the firm depicted in the diagram?

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

-Refer to Table 10-2. What is the output (Q) that maximises profit, and what is the price (P) charged?

-Refer to Table 10-1. What is the marginal revenue of the 3rd unit?

-Refer to Figure 10-9. Which of the graphs in the figure depicts a monopolistically competitive firm that is earning economic profits?

Why are many companies concerned about brand management?

In a monopolistically competitive market, a successful new restaurant

A franchise is

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?

In theory, in the long run, monopolistically competitive firms earns zero profits. However, in reality there are some ways by which a firm can avoid losing profits. Which of the following is one such way?

The profit-maximising rule for a monopolistically competitive firm is to select the quantity at which

-Refer to Figure 10-4. What is the area that represents the total variable cost of production?

When a monopolistically competitive firm cuts its price to increase its sales, it experiences a loss in revenue due to the income effect and a gain in revenue due to the substitution effect.

A monopolistically competitive firm maximises profit where

A monopolistically competitive firm that earns an accounting profit in the short run

If buyers of a monopolistically competitive product feel the products of different sellers have few differences between them, then the demand for each seller's product is relatively elastic.

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

-Refer to Table 10-3. What is its average variable cost of production at its optimal output level?

Economics Foundations and Models

Choices and Trade - Offs in the Market

Where Prices Come Frome : The Interaction of Demand and Supply

Elasticity: The Responsiveness of Demand and Supply

Economic Efficiency , Government Price Setting and Taxes

Concumer Choice and Behavioural Economics

Technology , Production and Costs

Firms in Perfectly Compitive Markets

Monopoly Markets

Oligopoly : Firms in Less Competitve Markets

The Market for Labour and Other Factors of Production

International Trade

Government Intervention in the Market

Externalities , Environmental Policy and Public Goods

The Distribution of Income and Social Policy

Filters

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

-Refer to Figure 10-15. Which of the following statements describes the firm depicted in the diagram?

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

-Refer to Table 10-2. What is the output (Q) that maximises profit, and what is the price (P) charged?

-Refer to Table 10-1. What is the marginal revenue of the 3rd unit?

-Refer to Figure 10-9. Which of the graphs in the figure depicts a monopolistically competitive firm that is earning economic profits?

Why are many companies concerned about brand management?

In a monopolistically competitive market, a successful new restaurant

A franchise is

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?

In theory, in the long run, monopolistically competitive firms earns zero profits. However, in reality there are some ways by which a firm can avoid losing profits. Which of the following is one such way?

The profit-maximising rule for a monopolistically competitive firm is to select the quantity at which

-Refer to Figure 10-4. What is the area that represents the total variable cost of production?

When a monopolistically competitive firm cuts its price to increase its sales, it experiences a loss in revenue due to the income effect and a gain in revenue due to the substitution effect.

A monopolistically competitive firm maximises profit where

A monopolistically competitive firm that earns an accounting profit in the short run

If buyers of a monopolistically competitive product feel the products of different sellers have few differences between them, then the demand for each seller's product is relatively elastic.

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

-Refer to Table 10-3. What is its average variable cost of production at its optimal output level?

Economics Foundations and Models

Choices and Trade - Offs in the Market

Where Prices Come Frome : The Interaction of Demand and Supply

Elasticity: The Responsiveness of Demand and Supply

Economic Efficiency , Government Price Setting and Taxes

Concumer Choice and Behavioural Economics

Technology , Production and Costs

Firms in Perfectly Compitive Markets

Monopoly Markets

Oligopoly : Firms in Less Competitve Markets

The Market for Labour and Other Factors of Production

International Trade

Government Intervention in the Market

Externalities , Environmental Policy and Public Goods

The Distribution of Income and Social Policy

Filters