Question 1

Figure 10-12  
-Refer to Figure 10-12.What is the allocatively efficient output for the firm represented in the diagram?

Accepted Answer

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

Question 2

Brand management refers to

Accepted Answer

A) picking a brand name for a new product that will attract attention. 
B) the efforts to maintain the differentiation of a product over time. 
C) efforts to reduce the cost of production. 
D) selling the right to use a brand name in a particular market. 
A) picking a brand name for a new product that will attract attention. 
B) the efforts to maintain the differentiation of a product over time. 
C) efforts to reduce the cost of production. 
D) selling the right to use a brand name in a particular market.

Question 3

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 4

Despite being in a market with ________,from the mid-1990s to the mid-2000s Starbucks was able to significantly differentiate its products from the products of its competitors.

Accepted Answer

A) few barriers to entry 
B) significant barriers to entry 
C) blocked entry 
D) no barriers to entry 
A) few barriers to entry 
B) significant barriers to entry 
C) blocked entry 
D) no barriers to entry

Question 5

A firm cannot control all of the factors that allow it to make economic profits.Which of the following is an example of an uncontrollable factor?

Accepted Answer

A) product differentiation 
B) input prices 
C) producing at a lower average total cost than competing firms 
D) hiring competent managers 
A) product differentiation 
B) input prices 
C) producing at a lower average total cost than competing firms 
D) hiring competent managers

Question 6

Which of the following characteristics is not common to monopolistic competition and perfect competition?

Accepted Answer

A) Firms act to maximise profit. 
B) Entry barriers into the industry are low. 
C) The market demand curve is downward sloping. 
D) Firms take market prices as given. 
A) Firms act to maximise profit. 
B) Entry barriers into the industry are low. 
C) The market demand curve is downward sloping. 
D) Firms take market prices as given.

Question 7

Economists have long debated whether there is a significant loss of well-being to society in markets that are monopolistically competitive rather than perfectly competitive.Which of the following offers the best reason why some economists believe that monopolistically competitive markets benefit consumers despite any loss of well-being?

Accepted Answer

A) Although consumers may pay a price greater than marginal cost for a product,the product is produced at the minimum average total cost. 
B) Although consumers may pay a price greater than marginal cost and the product is not produced at minimum average total cost,they benefit from being able to buy a differentiated product more closely suited to their tastes. 
C) Consumers pay a price equal to the marginal cost of producing a product,even though it is not produced at the minimum average total cost. 
D) Consumers are better off choosing from a variety of differentiated products,even though product differentiation causes barriers that restrict entry into monopolistically competitive markets. 
A) Although consumers may pay a price greater than marginal cost for a product,the product is produced at the minimum average total cost. 
B) Although consumers may pay a price greater than marginal cost and the product is not produced at minimum average total cost,they benefit from being able to buy a differentiated product more closely suited to their tastes. 
C) Consumers pay a price equal to the marginal cost of producing a product,even though it is not produced at the minimum average total cost. 
D) Consumers are better off choosing from a variety of differentiated products,even though product differentiation causes barriers that restrict entry into monopolistically competitive markets.

Question 8

When new firms are encouraged to enter a monopolistically competitive market,

Accepted Answer

A) some existing firms must be earning economic profits. 
B) they do so because there is insufficient product differentiation. 
C) the demand curve facing an existing firm shifts to the right. 
D) the marginal cost curve facing an existing firm shifts downwards. 
A) some existing firms must be earning economic profits. 
B) they do so because there is insufficient product differentiation. 
C) the demand curve facing an existing firm shifts to the right. 
D) the marginal cost curve facing an existing firm shifts downwards.

Question 9

Both the perfectly competitive firm and the monopolistically competitive firm produce at the output where marginal revenue equals marginal cost (MR = MC)but only the perfectly competitive firm achieves allocative efficiency.Explain why this is the case.

Accepted Answer

Unlike the perfectly competitive firm,th

Question 10

A monopolistically competitive firm maximises profit in the short run by producing where

Accepted Answer

A) price is less than marginal cost. 
B) price is less than marginal revenue. 
C) price is less than average revenue. 
D) price is greater than marginal cost. 
A) price is less than marginal cost. 
B) price is less than marginal revenue. 
C) price is less than average revenue. 
D) price is greater than marginal cost.

Question 11

Figure 10-12  
-Refer to Figure 10-12.What is the monopolistic competitor's profit-maximising output?

Accepted Answer

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

Question 12

Which of the following will not happen as a consequence of a monopolistically competitive firm suffering economic losses in the short run?

Accepted Answer

A) The firm's demand curve will shift to the right if it stays in business in the long run. 
B) The firm will exit the industry if it continues to suffer economic losses. 
C) The firm will break even if its stays in business in the long run. 
D) In the long run,the firm will be able to charge a price that is greater than its average total cost. 
A) The firm's demand curve will shift to the right if it stays in business in the long run. 
B) The firm will exit the industry if it continues to suffer economic losses. 
C) The firm will break even if its stays in business in the long run. 
D) In the long run,the firm will be able to charge a price that is greater than its average total cost.

Question 13

Table 10-3
   Table 10-3 shows the demand and cost schedules for a monopolistically competitive firm.
-Refer to Table 10-3.If this firm continues to produce,what is likely to happen to the product's price in the long run?

Accepted Answer

A) It will fall. 
B) It will increase 
C) It will remain constant. 
D) It cannot be determined without information on its long-run demand curve. 
A) It will fall. 
B) It will increase 
C) It will remain constant. 
D) It cannot be determined without information on its long-run demand curve.

Question 14

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 15

A firm that successfully differentiates its product or lowers its average cost of production creates

Accepted Answer

A) value for its customers. 
B) entry barriers into its market. 
C) a perfectly inelastic demand curve for its product. 
D) economies of scale. 
A) value for its customers. 
B) entry barriers into its market. 
C) a perfectly inelastic demand curve for its product. 
D) economies of scale.

Question 16

When a monopolistically competitive firm breaks even in the long run,this is equivalent to earning a zero accounting profit.

Accepted Answer

A) True 
 B)False

Question 17

Monopolistically competitive firms have downward-sloping demand curves.In the long run,monopolistically competitive firms earn zero economic profits.These two characteristics imply that in the long run

Accepted Answer

A) monopolistically competitive markets achieve productive efficiency. 
B) monopolistically competitive markets achieve allocative efficiency. 
C) monopolistically competitive firms earn economic profits. 
D) monopolistically competitive firms have excess capacity. 
A) monopolistically competitive markets achieve productive efficiency. 
B) monopolistically competitive markets achieve allocative efficiency. 
C) monopolistically competitive firms earn economic profits. 
D) monopolistically competitive firms have excess capacity.

Question 18

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 19

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 20

You have just opened a new Italian restaurant in your hometown where there are three other Italian restaurants.Your restaurant is doing a brisk business and you attribute your success to your distinctive northern Italian cuisine using locally grown organic produce.What is likely to happen to your business in the long run?

Accepted Answer

A) Your competitors are likely to change their menus to make their products more similar to yours. 
B) Your success will invite others to open competing restaurants and ultimately your profits will be driven to zero. 
C) If your success continues,you will be likely to establish a franchise and expand your market size. 
D) If you continue to maintain consistent quality,you will be able to earn profits indefinitely. 
A) Your competitors are likely to change their menus to make their products more similar to yours. 
B) Your success will invite others to open competing restaurants and ultimately your profits will be driven to zero. 
C) If your success continues,you will be likely to establish a franchise and expand your market size. 
D) If you continue to maintain consistent quality,you will be able to earn profits indefinitely.

Figure 10-12 -Refer to Figure 10-12.What is the allocatively efficient output for the firm represented in the diagram?

Brand management refers to

Which of the following statements is true?

Despite being in a market with ________,from the mid-1990s to the mid-2000s Starbucks was able to significantly differentiate its products from the products of its competitors.

A firm cannot control all of the factors that allow it to make economic profits.Which of the following is an example of an uncontrollable factor?

Which of the following characteristics is not common to monopolistic competition and perfect competition?

When new firms are encouraged to enter a monopolistically competitive market,

Both the perfectly competitive firm and the monopolistically competitive firm produce at the output where marginal revenue equals marginal cost (MR = MC)but only the perfectly competitive firm achieves allocative efficiency.Explain why this is the case.

A monopolistically competitive firm maximises profit in the short run by producing where

Figure 10-12 -Refer to Figure 10-12.What is the monopolistic competitor's profit-maximising output?

Which of the following will not happen as a consequence of a monopolistically competitive firm suffering economic losses in the short run?

Table 10-3 Table 10-3 shows the demand and cost schedules for a monopolistically competitive firm. -Refer to Table 10-3.If this firm continues to produce,what is likely to happen to the product's price in the long run?

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

A firm that successfully differentiates its product or lowers its average cost of production creates

When a monopolistically competitive firm breaks even in the long run,this is equivalent to earning a zero accounting profit.

Monopolistically competitive firms have downward-sloping demand curves.In the long run,monopolistically competitive firms earn zero economic profits.These two characteristics imply that in the long run

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.

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

Figure 10-12 -Refer to Figure 10-12.What is the allocatively efficient output for the firm represented in the diagram?

Brand management refers to

Which of the following statements is true?

Despite being in a market with ________,from the mid-1990s to the mid-2000s Starbucks was able to significantly differentiate its products from the products of its competitors.

A firm cannot control all of the factors that allow it to make economic profits.Which of the following is an example of an uncontrollable factor?

Which of the following characteristics is not common to monopolistic competition and perfect competition?

When new firms are encouraged to enter a monopolistically competitive market,

Both the perfectly competitive firm and the monopolistically competitive firm produce at the output where marginal revenue equals marginal cost (MR = MC)but only the perfectly competitive firm achieves allocative efficiency.Explain why this is the case.

A monopolistically competitive firm maximises profit in the short run by producing where

Figure 10-12 -Refer to Figure 10-12.What is the monopolistic competitor's profit-maximising output?

Which of the following will not happen as a consequence of a monopolistically competitive firm suffering economic losses in the short run?

Table 10-3 Table 10-3 shows the demand and cost schedules for a monopolistically competitive firm. -Refer to Table 10-3.If this firm continues to produce,what is likely to happen to the product's price in the long run?

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

A firm that successfully differentiates its product or lowers its average cost of production creates

When a monopolistically competitive firm breaks even in the long run,this is equivalent to earning a zero accounting profit.

Monopolistically competitive firms have downward-sloping demand curves.In the long run,monopolistically competitive firms earn zero economic profits.These two characteristics imply that in the long run

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.

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