Question 1

A major difference between monopolistic competition and perfect competition is

Accepted Answer

A) the number of sellers in the markets. 
B) the degree by which the market demand curves slope downwards. 
C) that products are not standardised in monopolistic competition,unlike in perfect competition. 
D) the barriers to entry in the two markets. 
A) the number of sellers in the markets. 
B) the degree by which the market demand curves slope downwards. 
C) that products are not standardised in monopolistic competition,unlike in perfect competition. 
D) the barriers to entry in the two markets.

Question 2

Consumers in monopolistically competitive markets face a trade-off between paying prices greater than marginal costs and purchasing products that are more closely suited to their tastes.

Accepted Answer

A) True 
 B)False

Question 3

One way by which firms differentiate their products is to find a market niche.

Accepted Answer

A) True 
 B)False

Question 4

When a monopolistically competitive firm lowers it price,one bad thing happens to the firm.What is this 'one bad thing' called?

Accepted Answer

A) the output effect 
B) the income effect 
C) the substitution effect 
D) the price effect 
A) the output effect 
B) the income effect 
C) the substitution effect 
D) the price effect

Question 5

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 6

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 7

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 8

The marginal revenue of a monopolistically competitive firm

Accepted Answer

A) cannot be negative because the price the firm charges will always be greater than zero. 
B) can be negative if the firm charges a high price. 
C) can be negative if the firm charges a low price. 
D) will equal average revenue. 
A) cannot be negative because the price the firm charges will always be greater than zero. 
B) can be negative if the firm charges a high price. 
C) can be negative if the firm charges a low price. 
D) will equal average revenue.

Question 9

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 10

In the short run,a profit-maximising firm's decision to produce should be guided by whether

Accepted Answer

A) it makes a profit. 
B) its marginal profit is maximised. 
C) its total revenue exceeds its fixed cost. 
D) its total revenue covers its variable cost. 
A) it makes a profit. 
B) its marginal profit is maximised. 
C) its total revenue exceeds its fixed cost. 
D) its total revenue covers its variable cost.

Question 11

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 12

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 amount of the firm's loss at its optimal output level?

Accepted Answer

A) $0 
B) $41 
C) $45 
D) $50 
A) $0 
B) $41 
C) $45 
D) $50

Question 13

To maximise their profits and defend those profits from competitors,monopolistically competitive firms must

Accepted Answer

A) lobby government to erect barriers to entry in their industries. 
B) limit foreign competition in their markets by encouraging the government to impose tariffs and other trade restrictions. 
C) differentiate their products. 
D) achieve economies of scale. 
A) lobby government to erect barriers to entry in their industries. 
B) limit foreign competition in their markets by encouraging the government to impose tariffs and other trade restrictions. 
C) differentiate their products. 
D) achieve economies of scale.

Question 14

What is meant by 'excess capacity'? How does it relate to consumer utility?

Accepted Answer

Excess capacity refers to a situation wh

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

Which of the following is true of a typical firm in a monopolistically competitive industry?

Accepted Answer

A) Product differentiation allows a successful firm to emerge as a market leader in the industry. 
B) All firms have identical cost structures. 
C) The more successful firms have an incentive to merge in order to exert greater market power. 
D) Each firm acts independently. 
A) Product differentiation allows a successful firm to emerge as a market leader in the industry. 
B) All firms have identical cost structures. 
C) The more successful firms have an incentive to merge in order to exert greater market power. 
D) Each firm acts independently.

Question 17

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 18

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 minimised. 
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 minimised. 
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 19

For a downward-sloping demand curve,marginal revenue decreases as quantity sold increases.

Accepted Answer

A) True 
 B)False

Question 20

Figure 10-12  
-Refer to Figure 10-12.What is the productively 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

A major difference between monopolistic competition and perfect competition is

Consumers in monopolistically competitive markets face a trade-off between paying prices greater than marginal costs and purchasing products that are more closely suited to their tastes.

One way by which firms differentiate their products is to find a market niche.

When a monopolistically competitive firm lowers it price,one bad thing happens to the firm.What is this 'one bad thing' called?

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

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

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?

The marginal revenue of a monopolistically competitive firm

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

In the short run,a profit-maximising firm's decision to produce should be guided by whether

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?

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 amount of the firm's loss at its optimal output level?

To maximise their profits and defend those profits from competitors,monopolistically competitive firms must

What is meant by 'excess capacity'? How does it relate to consumer utility?

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.

Which of the following is true of a typical firm in a monopolistically competitive industry?

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

For a downward-sloping demand curve,marginal revenue decreases as quantity sold increases.

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

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

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Exam 10: Monopolistic Competition

A major difference between monopolistic competition and perfect competition is

Consumers in monopolistically competitive markets face a trade-off between paying prices greater than marginal costs and purchasing products that are more closely suited to their tastes.

One way by which firms differentiate their products is to find a market niche.

When a monopolistically competitive firm lowers it price,one bad thing happens to the firm.What is this 'one bad thing' called?

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

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

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?

The marginal revenue of a monopolistically competitive firm

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

In the short run,a profit-maximising firm's decision to produce should be guided by whether

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?

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 amount of the firm's loss at its optimal output level?

To maximise their profits and defend those profits from competitors,monopolistically competitive firms must

What is meant by 'excess capacity'? How does it relate to consumer utility?

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.

Which of the following is true of a typical firm in a monopolistically competitive industry?

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

For a downward-sloping demand curve,marginal revenue decreases as quantity sold increases.

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

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