Question 1

The ability to engage in product differentiation is one of the factors a manager or owner of a firm can control in order to create value for consumers.

Accepted Answer

A) True 
 B)False  True

Question 2

Figure 10-14  
-Refer to Figure 10-14.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 C

Question 3

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.Victoria's profit-maximising output is where

Accepted Answer

A) total profit equals $3. 
B) marginal revenue and marginal cost both equal $4. 
C) marginal revenue and marginal cost both equal $3. 
D) marginal cost is at its minimum value. 
A) total profit equals $3. 
B) marginal revenue and marginal cost both equal $4. 
C) marginal revenue and marginal cost both equal $3. 
D) marginal cost is at its minimum value. C

Question 4

A monopolistic competitor does not earn profits in the long run unless it can successfully differentiate its product in the minds of its consumers.

Accepted Answer

A) True 
 B)False

Question 5

Marketing refers to all the activities necessary for a firm to sell a product to a consumer.

Accepted Answer

A) True 
 B)False

Question 6

The economic analysis of monopolistic competition shows that market forces eliminate profits in the long run.However,it is possible for a firm to continue to earn economic profits if the firm

Accepted Answer

A) expands its marketing budget. 
B) adopts new technologies that enable it to lower its cost of production. 
C) expands its product offerings to appeal to a wider range of consumers. 
D) reduces its price to expand its market. 
A) expands its marketing budget. 
B) adopts new technologies that enable it to lower its cost of production. 
C) expands its product offerings to appeal to a wider range of consumers. 
D) reduces its price to expand its market.

Question 7

Figure 10-4   Figure 10-4 shows short-run cost and demand curves for a monopolistically competitive firm in the market for designer watches.
-Refer to Figure 10-4.What is the area that represents the loss made by the firm?

Accepted Answer

A) the area P0adP3 
B) the area P1bcP2 
C) the area P0acP2 
D) the area P2cdP3 
A) the area P0adP3 
B) the area P1bcP2 
C) the area P0acP2 
D) the area P2cdP3

Question 8

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-maximising 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-maximising 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 9

Sparkle,one of many firms in the market for toothpaste,is in long-run equilibrium.Sparkle has a small market share and has been in business for a long time.
a.Identify the market structure in which Sparkle operates.Explain your answer.
b.What is Sparkle's profit or loss? Explain your answer.If you cannot determine the profit or loss,explain what information is missing.
c.Draw a diagram showing Sparkle's demand curve,marginal revenue curve,average total cost curve and marginal cost curve.Label your diagram.

Accepted Answer

a.Monopolistic competition;pro

Question 10

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 11

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

Question 12

Does the fact that monopolistically competitive firms do not achieve productive efficiency or allocative efficiency mean that there is a significant loss in consumer welfare?

Accepted Answer

No.Although monopolistically competitive

Question 13

Figure 10-16  
-Refer to Figure 10-16 to answer the following questions.
a.What is the profit-maximising output level?
b.What is the profit-maximising price?
c.What is the average total cost at the profit-maximising output level?
d.What area represents the firm's profit?
e.At which output level are economies of scale exhausted?
f.Does this graph most likely represent the long run or the short run? Why?

Accepted Answer

a.The profit maximising level of output

Question 14

Table 10-3
   Table 10-3 shows the demand and cost schedules for a monopolistically competitive firm.
-Refer to Table 10-3.What is the best course of action for the firm in the short run?

Accepted Answer

A) It should shut down. 
B) It should stay in business because it covers some of its fixed cost. 
C) It should increase its sales by lowering its price. 
D) It should not cut its price,but it should increase its sales by advertising. 
A) It should shut down. 
B) It should stay in business because it covers some of its fixed cost. 
C) It should increase its sales by lowering its price. 
D) It should not cut its price,but it should increase its sales by advertising.

Question 15

A monopolistically competitive firm should lower its price if its marginal revenue exceeds its marginal cost.

Accepted Answer

A) True 
 B)False

Question 16

Figure 10-9  
-Refer to Figure 10-9.Which of the graphs in the figure depicts a monopolistically competitive firm that is minimising its losses?

Accepted Answer

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

Question 17

The most important of the factors that make a firm successful and that can be controlled by the firm's owners and managers are

Accepted Answer

A) the establishment of trademarks for its products and the aggressive defense of those trademarks. 
B) lobbying government to erect or enforce entry barriers in its markets and the marketing of its products as widely as possible. 
C) the differentiation of its products and the production of products at a lower average cost than competing firms. 
D) the selection of the prices of its products and the selection of the most productive and loyal employees. 
A) the establishment of trademarks for its products and the aggressive defense of those trademarks. 
B) lobbying government to erect or enforce entry barriers in its markets and the marketing of its products as widely as possible. 
C) the differentiation of its products and the production of products at a lower average cost than competing firms. 
D) the selection of the prices of its products and the selection of the most productive and loyal employees.

Question 18

What is the trade-off that consumers face when buying the product of a monopolistically competitive firm?

Accepted Answer

A) Consumers pay higher prices but receive better quality goods compared to the output of perfectly competitive firms. 
B) Consumers pay a price greater than marginal cost but have the luxury of choices more suited to their tastes. 
C) Consumers pay higher prices but the products are produced by highly efficient firms. 
D) Consumers pay lower prices but have fewer choices. 
A) Consumers pay higher prices but receive better quality goods compared to the output of perfectly competitive firms. 
B) Consumers pay a price greater than marginal cost but have the luxury of choices more suited to their tastes. 
C) Consumers pay higher prices but the products are produced by highly efficient firms. 
D) Consumers pay lower prices but have fewer choices.

Question 19

If a firm has excess capacity,it means

Accepted Answer

A) that the firm expends too much of its resources on advertising its product without seeing an appreciable increase in sales. 
B) that the firm is not producing its minimum efficient scale of output. 
C) that the firm's long-run average cost of producing a given quantity exceeds its short-run cost of producing that same quantity. 
D) that the firm's quantity supplied exceeds its quantity demanded. 
A) that the firm expends too much of its resources on advertising its product without seeing an appreciable increase in sales. 
B) that the firm is not producing its minimum efficient scale of output. 
C) that the firm's long-run average cost of producing a given quantity exceeds its short-run cost of producing that same quantity. 
D) that the firm's quantity supplied exceeds its quantity demanded.

Question 20

In the long-run equilibrium,both the perfectly competitive firm and the monopolistically competitive firm produce the output at which MR = MC and charge a price equal to the average total cost of production.

Accepted Answer

A) True 
 B)False

The ability to engage in product differentiation is one of the factors a manager or owner of a firm can control in order to create value for consumers.

Figure 10-14 -Refer to Figure 10-14.Economies of scale are exhausted at which output level?

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.Victoria's profit-maximising output is where

A monopolistic competitor does not earn profits in the long run unless it can successfully differentiate its product in the minds of its consumers.

Marketing refers to all the activities necessary for a firm to sell a product to a consumer.

The economic analysis of monopolistic competition shows that market forces eliminate profits in the long run.However,it is possible for a firm to continue to earn economic profits if the firm

Figure 10-4 Figure 10-4 shows short-run cost and demand curves for a monopolistically competitive firm in the market for designer watches. -Refer to Figure 10-4.What is the area that represents the loss made by the firm?

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

For a monopolistically competitive firm,marginal revenue

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

Does the fact that monopolistically competitive firms do not achieve productive efficiency or allocative efficiency mean that there is a significant loss in consumer welfare?

Table 10-3 Table 10-3 shows the demand and cost schedules for a monopolistically competitive firm. -Refer to Table 10-3.What is the best course of action for the firm in the short run?

A monopolistically competitive firm should lower its price if its marginal revenue exceeds its marginal cost.

Figure 10-9 -Refer to Figure 10-9.Which of the graphs in the figure depicts a monopolistically competitive firm that is minimising its losses?

The most important of the factors that make a firm successful and that can be controlled by the firm's owners and managers are

What is the trade-off that consumers face when buying the product of a monopolistically competitive firm?

If a firm has excess capacity,it means

In the long-run equilibrium,both the perfectly competitive firm and the monopolistically competitive firm produce the output at which MR = MC and charge a price equal to the average total cost of production.

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: Firms in Less Competitive Markets

The Markets 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 ability to engage in product differentiation is one of the factors a manager or owner of a firm can control in order to create value for consumers.

Figure 10-14 -Refer to Figure 10-14.Economies of scale are exhausted at which output level?

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.Victoria's profit-maximising output is where

A monopolistic competitor does not earn profits in the long run unless it can successfully differentiate its product in the minds of its consumers.

Marketing refers to all the activities necessary for a firm to sell a product to a consumer.

The economic analysis of monopolistic competition shows that market forces eliminate profits in the long run.However,it is possible for a firm to continue to earn economic profits if the firm

Figure 10-4 Figure 10-4 shows short-run cost and demand curves for a monopolistically competitive firm in the market for designer watches. -Refer to Figure 10-4.What is the area that represents the loss made by the firm?

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

For a monopolistically competitive firm,marginal revenue

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

Does the fact that monopolistically competitive firms do not achieve productive efficiency or allocative efficiency mean that there is a significant loss in consumer welfare?

Table 10-3 Table 10-3 shows the demand and cost schedules for a monopolistically competitive firm. -Refer to Table 10-3.What is the best course of action for the firm in the short run?

A monopolistically competitive firm should lower its price if its marginal revenue exceeds its marginal cost.

Figure 10-9 -Refer to Figure 10-9.Which of the graphs in the figure depicts a monopolistically competitive firm that is minimising its losses?

The most important of the factors that make a firm successful and that can be controlled by the firm's owners and managers are

What is the trade-off that consumers face when buying the product of a monopolistically competitive firm?

If a firm has excess capacity,it means

In the long-run equilibrium,both the perfectly competitive firm and the monopolistically competitive firm produce the output at which MR = MC and charge a price equal to the average total cost of production.

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: Firms in Less Competitive Markets

The Markets 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