Question 1

Which of the following statements is true?

Accepted Answer

A) Input prices are one of the success factors that firms can control. 
B) Consumers will buy a product only if its price is below that of its competitors. 
C) Consumers will buy a product only if it meets a need not met by competing products. 
D) Sheer chance can play a significant role in the success or failure of a business. 
A) Input prices are one of the success factors that firms can control. 
B) Consumers will buy a product only if its price is below that of its competitors. 
C) Consumers will buy a product only if it meets a need not met by competing products. 
D) Sheer chance can play a significant role in the success or failure of a business.

Question 2

Figure 13-7  
-Refer to Figure 13-7.If the diagram represents a typical firm in the market,what is likely to happen in the long run?

Accepted Answer

A) Some firms will exit the market causing the demand to increase for firms remaining in the market. 
B) New firms will enter the market causing the demand to decrease for existing firms. 
C) Inefficient firms will exit the market and new cost-efficient firms will enter the market. 
D) Competition will be intensified as firms strive to make long-run profits. 
A) Some firms will exit the market causing the demand to increase for firms remaining in the market. 
B) New firms will enter the market causing the demand to decrease for existing firms. 
C) Inefficient firms will exit the market and new cost-efficient firms will enter the market. 
D) Competition will be intensified as firms strive to make long-run profits.

Question 3

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 4

A monopolistically competitive market is described as one in which there are

Accepted Answer

A) a few firms producing an identical product. 
B) a large number of firms selling similar,but not identical,products. 
C) a few firms producing differentiated products. 
D) one large firm and many small firms producing identical products. 
A) a few firms producing an identical product. 
B) a large number of firms selling similar,but not identical,products. 
C) a few firms producing differentiated products. 
D) one large firm and many small firms producing identical products.

Question 5

Monopolistically competitive firms achieve allocative efficiency but not productive efficiency.

Accepted Answer

A) True 
 B)False

Question 6

Compared to a perfectly competitive firm,the demand curve facing a monopolistically competitive firm is

Accepted Answer

A) more elastic because there are many close substitutes for the product of a monopolistically competitive firm. 
B) less elastic because monopolistically competitive firms produce similar,but not identical,products. 
C) just as elastic because there are many sellers in both markets. 
D) more elastic because in the long run,the demand curve is tangent to the firm's average total cost curve. 
A) more elastic because there are many close substitutes for the product of a monopolistically competitive firm. 
B) less elastic because monopolistically competitive firms produce similar,but not identical,products. 
C) just as elastic because there are many sellers in both markets. 
D) more elastic because in the long run,the demand curve is tangent to the firm's average total cost curve.

Question 7

Figure 13-7  
-Refer to Figure 13-7.Economies of scale are exhausted at which output level?

Accepted Answer

A) Q1 units 
B) Q2 units 
C) Q3 units 
D) more than Q1 units 
A) Q1 units 
B) Q2 units 
C) Q3 units 
D) more than Q1 units

Question 8

Being the first to sell a particular good can give a firm advantages over other firms that sell similar products.What is the name given to these advantages?

Accepted Answer

A) first-mover 
B) first come,first served 
C) follow the leader 
D) first to market 
A) first-mover 
B) first come,first served 
C) follow the leader 
D) first to market

Question 9

Excess capacity is a characteristic of monopolistically competitive firms.What does excess capacity mean?

Accepted Answer

A) It means that firms do not produce the output level that corresponds to the minimum point on their average total cost curves. 
B) It means that firms hire more than the minimum number of workers needed to produce the profit-maximizing level of output. 
C) It means that firms produce with inefficient combinations of resources. 
D) It means that firms build plants that are not large enough to achieve minimum efficient scale. 
A) It means that firms do not produce the output level that corresponds to the minimum point on their average total cost curves. 
B) It means that firms hire more than the minimum number of workers needed to produce the profit-maximizing level of output. 
C) It means that firms produce with inefficient combinations of resources. 
D) It means that firms build plants that are not large enough to achieve minimum efficient scale.

Question 10

If firms in a monopolistically competitive market are earning economic profits,which of the following scenarios best reflects the change a representative firm experiences as the market adjusts to its long-run equilibrium?

Accepted Answer

A) Demand decreases and becomes less elastic. 
B) Demand decreases and becomes more elastic. 
C) Demand increases and becomes less elastic. 
D) Demand increases and becomes more elastic. 
A) Demand decreases and becomes less elastic. 
B) Demand decreases and becomes more elastic. 
C) Demand increases and becomes less elastic. 
D) Demand increases and becomes more elastic.

Question 11

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 12

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 13

Figure 13-1  
-Refer to Figure 13-1.The marginal revenue from one additional unit sold is the sum of the gain in revenue from selling the additional unit and the loss in revenue from having to charge a lower price to sell the additional unit.Based on the diagram in the figure,

Accepted Answer

A) X represents the gain (price effect)and Y the loss (output effect). 
B) X + Z represents the loss (output effect)and Y the gain (price effect). 
C) Y represents the gain (output effect)and X the loss (price effect). 
D) X represents the loss (price effect)and Y + Z the gain (output effect). 
A) X represents the gain (price effect)and Y the loss (output effect). 
B) X + Z represents the loss (output effect)and Y the gain (price effect). 
C) Y represents the gain (output effect)and X the loss (price effect). 
D) X represents the loss (price effect)and Y + Z the gain (output effect).

Question 14

After selling 1,000 three-ring binders Tony DiFulvio realizes that the marginal revenue from selling the last binder was less than the marginal cost.From this we can conclude that

Accepted Answer

A) Tony's business earns a short-run economic profit. 
B) Tony should shut down his business temporarily. 
C) Tony's profit fell after selling his 1,000th three-ring binder. 
D) Tony's profit would be greater if he sold an additional three-ring binder. 
A) Tony's business earns a short-run economic profit. 
B) Tony should shut down his business temporarily. 
C) Tony's profit fell after selling his 1,000th three-ring binder. 
D) Tony's profit would be greater if he sold an additional three-ring binder.

Question 15

What are the key factors that determine the profitability of a firm in a monopolistically competitive market?

Accepted Answer

A monopolistically competitive firm's pr

Question 16

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 17

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 18

The profit-maximizing 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 19

For the monopolistically competitive firm,

Accepted Answer

A) Price (P)= Marginal Revenue (MR)= Average Revenue (AR). 
B) P = MR > AR. 
C) P = AR > MR. 
D) P > MR = AR. 
A) Price (P)= Marginal Revenue (MR)= Average Revenue (AR). 
B) P = MR > AR. 
C) P = AR > MR. 
D) P > MR = AR.

Question 20

Figure 13-7  
-Refer to Figure 13-7.What is the output price?

Accepted Answer

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

Which of the following statements is true?

Figure 13-7 -Refer to Figure 13-7.If the diagram represents a typical firm in the market,what is likely to happen in the long run?

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

A monopolistically competitive market is described as one in which there are

Monopolistically competitive firms achieve allocative efficiency but not productive efficiency.

Compared to a perfectly competitive firm,the demand curve facing a monopolistically competitive firm is

Figure 13-7 -Refer to Figure 13-7.Economies of scale are exhausted at which output level?

Being the first to sell a particular good can give a firm advantages over other firms that sell similar products.What is the name given to these advantages?

Excess capacity is a characteristic of monopolistically competitive firms.What does excess capacity mean?

If firms in a monopolistically competitive market are earning economic profits,which of the following scenarios best reflects the change a representative firm experiences as the market adjusts to its long-run equilibrium?

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

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?

Figure 13-1 -Refer to Figure 13-1.The marginal revenue from one additional unit sold is the sum of the gain in revenue from selling the additional unit and the loss in revenue from having to charge a lower price to sell the additional unit.Based on the diagram in the figure,

After selling 1,000 three-ring binders Tony DiFulvio realizes that the marginal revenue from selling the last binder was less than the marginal cost.From this we can conclude that

What are the key factors that determine the profitability of a firm in a monopolistically competitive market?

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

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

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

For the monopolistically competitive firm,

Figure 13-7 -Refer to Figure 13-7.What is the output price?

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

Which of the following statements is true?

Figure 13-7 -Refer to Figure 13-7.If the diagram represents a typical firm in the market,what is likely to happen in the long run?

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

A monopolistically competitive market is described as one in which there are

Monopolistically competitive firms achieve allocative efficiency but not productive efficiency.

Compared to a perfectly competitive firm,the demand curve facing a monopolistically competitive firm is

Figure 13-7 -Refer to Figure 13-7.Economies of scale are exhausted at which output level?

Being the first to sell a particular good can give a firm advantages over other firms that sell similar products.What is the name given to these advantages?

Excess capacity is a characteristic of monopolistically competitive firms.What does excess capacity mean?

If firms in a monopolistically competitive market are earning economic profits,which of the following scenarios best reflects the change a representative firm experiences as the market adjusts to its long-run equilibrium?

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

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?

Figure 13-1 -Refer to Figure 13-1.The marginal revenue from one additional unit sold is the sum of the gain in revenue from selling the additional unit and the loss in revenue from having to charge a lower price to sell the additional unit.Based on the diagram in the figure,

After selling 1,000 three-ring binders Tony DiFulvio realizes that the marginal revenue from selling the last binder was less than the marginal cost.From this we can conclude that

What are the key factors that determine the profitability of a firm in a monopolistically competitive market?

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

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

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

For the monopolistically competitive firm,

Figure 13-7 -Refer to Figure 13-7.What is the output price?

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