Question 1

When a monopolistically competitive firm cuts its price to increase its sales,it experiences a loss in revenue due to the

Accepted Answer

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

Question 2

Suppose a monopolistically competitive firm sells 25 units at a price of $10.Calculate its marginal revenue per unit of output if it sells 5 more units of output when it reduced its price to $9.

Accepted Answer

A) $270 
B) $20 
C) $4 
D) $2.50 
A) $270 
B) $20 
C) $4 
D) $2.50

Question 3

Table 10-5
   Table 10-5 shows the demand and cost data facing a monopolistically competitive producer of canvas bags.
-Refer to Table 10-5.At the profit-maximising or loss-minimising output level

Accepted Answer

A) the firm makes a profit of $12. 
B) the firm incurs a loss equal to its fixed cost. 
C) the firm makes a profit of $16. 
D) the firm incurs a loss of $14. 
A) the firm makes a profit of $12. 
B) the firm incurs a loss equal to its fixed cost. 
C) the firm makes a profit of $16. 
D) the firm incurs a loss of $14.

Question 4

What is the difference between zero accounting profit and zero economic profit?

Accepted Answer

Economic profits take into account oppor

Question 5

Firms use two marketing tools to differentiate their products.What are these two tools?

Accepted Answer

A) lobbying and word of mouth 
B) market research and demand estimation 
C) brand management and advertising 
D) consumer surveys and market experiments 
A) lobbying and word of mouth 
B) market research and demand estimation 
C) brand management and advertising 
D) consumer surveys and market experiments

Question 6

Which of the following is true of trademarks?

Accepted Answer

A) A successful trademark is one that becomes a generic name for a product,for example,'Xerox' has become a generic term for making photocopies. 
B) A successful trademark is one that allows consumers to immediately identify the source or producer of the product. 
C) If a firm is granted a trademark,then no other firms can legally produce similar products for a given period of time. 
D) If a firm is granted a trademark,then no other firms can legally sell in the same geographic area for a given period of time. 
A) A successful trademark is one that becomes a generic name for a product,for example,'Xerox' has become a generic term for making photocopies. 
B) A successful trademark is one that allows consumers to immediately identify the source or producer of the product. 
C) If a firm is granted a trademark,then no other firms can legally produce similar products for a given period of time. 
D) If a firm is granted a trademark,then no other firms can legally sell in the same geographic area for a given period of time.

Question 7

One goal a firm tries to achieve when it advertises a product is to

Accepted Answer

A) make the demand curve for the product more elastic. 
B) shift the demand curve for the product to the left. 
C) make the demand curve for the product unitary elastic. 
D) make the demand curve for the product more inelastic. 
A) make the demand curve for the product more elastic. 
B) shift the demand curve for the product to the left. 
C) make the demand curve for the product unitary elastic. 
D) make the demand curve for the product more inelastic.

Question 8

A successful trademark is one that becomes a generic name for a product,for example,'Kleenex' has become a generic term for tissues.

Accepted Answer

A) True 
 B)False

Question 9

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 total revenue made by the firm?

Accepted Answer

A) 0P0aQa 
B) 0P1bQa 
C) 0P2cQa 
D) 0P3dQa 
A) 0P0aQa 
B) 0P1bQa 
C) 0P2cQa 
D) 0P3dQa

Question 10

Figure 10-8   Figure 10-8 shows cost and demand curves for a monopolistically competitive producer of iced tea.
-Refer to Figure 10-8.What is the profit-maximising output level?

Accepted Answer

A) 22 cases 
B) 24 cases 
C) 30 cases 
D) 38 cases 
A) 22 cases 
B) 24 cases 
C) 30 cases 
D) 38 cases

Question 11

If firms in a monopolistically competitive industry are making profits in the short run,

Accepted Answer

A) barriers to entry will be erected to keep out rivals. 
B) some firms will ultimately exit the industry. 
C) they will resort to advertising wars to help sustain these profits. 
D) new firms will enter the market. 
A) barriers to entry will be erected to keep out rivals. 
B) some firms will ultimately exit the industry. 
C) they will resort to advertising wars to help sustain these profits. 
D) new firms will enter the market.

Question 12

Long-run equilibrium in a monopolistically competitive market is similar to long-run equilibrium in a perfectly competitive market in that in both markets,firms

Accepted Answer

A) produce at the minimum point of their average total cost curves. 
B) produce where price equals marginal cost. 
C) break even. 
D) produce where price equals marginal revenue. 
A) produce at the minimum point of their average total cost curves. 
B) produce where price equals marginal cost. 
C) break even. 
D) produce where price equals marginal revenue.

Question 13

A monopolistically competitive firm that is profitable in the short run will face competition that will eventually eliminate the firm's profits in the long run.But the firm can stave off competition and continue to earn economic profits if

Accepted Answer

A) it can successfully sue its competitors for copyright infringement. 
B) it can move to another country where there is less competition. 
C) it can lobby the government to establish a price floor for its product. 
D) it can find new ways to differentiate its product. 
A) it can successfully sue its competitors for copyright infringement. 
B) it can move to another country where there is less competition. 
C) it can lobby the government to establish a price floor for its product. 
D) it can find new ways to differentiate its product.

Question 14

In the long run,what happens to the demand curve facing a monopolistically competitive firm that is earning short-run profits?

Accepted Answer

A) The demand curve will shift to the left and became more elastic. 
B) The demand curve will shift to the left and became less elastic. 
C) The demand curve will shift to the right and became more elastic. 
D) The demand curve will shift to the right and became less elastic. 
A) The demand curve will shift to the left and became more elastic. 
B) The demand curve will shift to the left and became less elastic. 
C) The demand curve will shift to the right and became more elastic. 
D) The demand curve will shift to the right and became less elastic.

Question 15

Is a monopolistically competitive firm productively efficient?

Accepted Answer

A) No,because it does not produce at minimum average total cost. 
B) Yes,because it produces where marginal cost equals marginal revenue. 
C) No,because price is greater than marginal cost. 
D) Yes,because price equals average total cost. 
A) No,because it does not produce at minimum average total cost. 
B) Yes,because it produces where marginal cost equals marginal revenue. 
C) No,because price is greater than marginal cost. 
D) Yes,because price equals average total cost.

Question 16

One of the assumptions of monopolistic competition is that firms produce differentiated products.What does this assumption imply about the demand curve facing a representative firm?

Accepted Answer

Product differentiation is a s

Question 17

Figure 10-5  
-Refer to Figure 10-5.The chocolate store represented in the diagram is currently selling Qa units of candy at a price of Pa.Is this candy store maximising its profit and if it is not,what would you recommend to the firm?

Accepted Answer

A) Yes,it is maximising its profit by charging the highest price possible. 
B) No,it is not;since its marginal cost is constant,it should produce and sell as much chocolate as it can.It should sell Qd units at a price of Pd. 
C) No,it is not;it should lower its price to Pc and sell Qc units. 
D) No,it is not;it should lower its price to Pb and sell Qb units. 
A) Yes,it is maximising its profit by charging the highest price possible. 
B) No,it is not;since its marginal cost is constant,it should produce and sell as much chocolate as it can.It should sell Qd units at a price of Pd. 
C) No,it is not;it should lower its price to Pc and sell Qc units. 
D) No,it is not;it should lower its price to Pb and sell Qb units.

Question 18

Figure 10-7   Figure 10-7 shows short-run cost and demand curves for a monopolistically competitive firm in the footwear market.
-Refer to Figure 10-7.Which of the following is the area that represents the profit or loss experienced by the firm?

Accepted Answer

A) A loss represented by the rectangle P2uvP1. 
B) A loss represented by the rectangle P2uwP0. 
C) A loss represented by the rectangle P1vwP0. 
D) An accounting profit equal to P1vwP0. 
A) A loss represented by the rectangle P2uvP1. 
B) A loss represented by the rectangle P2uwP0. 
C) A loss represented by the rectangle P1vwP0. 
D) An accounting profit equal to P1vwP0.

Question 19

Tony's Italian Ice is a monopolistically competitive firm.If Tony's earns a profit in the short run,which of the following is most likely to occur?

Accepted Answer

A) New firms that sell Italian ice will enter the market and Tony's cost curves will shift to the left. 
B) New firms that sell Italian ice will enter the market and Tony's demand curve will shift to the left. 
C) New firms that sell Italian ice will enter the market and Tony's demand curve will shift to the right. 
D) New firms that sell Italian ice will enter the market and Tony's demand curve will become more inelastic. 
A) New firms that sell Italian ice will enter the market and Tony's cost curves will shift to the left. 
B) New firms that sell Italian ice will enter the market and Tony's demand curve will shift to the left. 
C) New firms that sell Italian ice will enter the market and Tony's demand curve will shift to the right. 
D) New firms that sell Italian ice will enter the market and Tony's demand curve will become more inelastic.

Question 20

Monopolistically competitive firms achieve allocative efficiency but not productive efficiency.

Accepted Answer

A) True 
 B)False

When a monopolistically competitive firm cuts its price to increase its sales,it experiences a loss in revenue due to the

Suppose a monopolistically competitive firm sells 25 units at a price of $10.Calculate its marginal revenue per unit of output if it sells 5 more units of output when it reduced its price to $9.

Table 10-5 Table 10-5 shows the demand and cost data facing a monopolistically competitive producer of canvas bags. -Refer to Table 10-5.At the profit-maximising or loss-minimising output level

What is the difference between zero accounting profit and zero economic profit?

Firms use two marketing tools to differentiate their products.What are these two tools?

Which of the following is true of trademarks?

One goal a firm tries to achieve when it advertises a product is to

A successful trademark is one that becomes a generic name for a product,for example,'Kleenex' has become a generic term for tissues.

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 total revenue made by the firm?

Figure 10-8 Figure 10-8 shows cost and demand curves for a monopolistically competitive producer of iced tea. -Refer to Figure 10-8.What is the profit-maximising output level?

If firms in a monopolistically competitive industry are making profits in the short run,

Long-run equilibrium in a monopolistically competitive market is similar to long-run equilibrium in a perfectly competitive market in that in both markets,firms

A monopolistically competitive firm that is profitable in the short run will face competition that will eventually eliminate the firm's profits in the long run.But the firm can stave off competition and continue to earn economic profits if

In the long run,what happens to the demand curve facing a monopolistically competitive firm that is earning short-run profits?

Is a monopolistically competitive firm productively efficient?

One of the assumptions of monopolistic competition is that firms produce differentiated products.What does this assumption imply about the demand curve facing a representative firm?

Figure 10-5 -Refer to Figure 10-5.The chocolate store represented in the diagram is currently selling Q_a units of candy at a price of P_a.Is this candy store maximising its profit and if it is not,what would you recommend to the firm?

Figure 10-7 Figure 10-7 shows short-run cost and demand curves for a monopolistically competitive firm in the footwear market. -Refer to Figure 10-7.Which of the following is the area that represents the profit or loss experienced by the firm?

Tony's Italian Ice is a monopolistically competitive firm.If Tony's earns a profit in the short run,which of the following is most likely to occur?

Monopolistically competitive firms achieve allocative efficiency but not productive efficiency.

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

When a monopolistically competitive firm cuts its price to increase its sales,it experiences a loss in revenue due to the

Suppose a monopolistically competitive firm sells 25 units at a price of $10.Calculate its marginal revenue per unit of output if it sells 5 more units of output when it reduced its price to $9.

Table 10-5 Table 10-5 shows the demand and cost data facing a monopolistically competitive producer of canvas bags. -Refer to Table 10-5.At the profit-maximising or loss-minimising output level

What is the difference between zero accounting profit and zero economic profit?

Firms use two marketing tools to differentiate their products.What are these two tools?

Which of the following is true of trademarks?

One goal a firm tries to achieve when it advertises a product is to

A successful trademark is one that becomes a generic name for a product,for example,'Kleenex' has become a generic term for tissues.

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 total revenue made by the firm?

Figure 10-8 Figure 10-8 shows cost and demand curves for a monopolistically competitive producer of iced tea. -Refer to Figure 10-8.What is the profit-maximising output level?

If firms in a monopolistically competitive industry are making profits in the short run,

Long-run equilibrium in a monopolistically competitive market is similar to long-run equilibrium in a perfectly competitive market in that in both markets,firms

A monopolistically competitive firm that is profitable in the short run will face competition that will eventually eliminate the firm's profits in the long run.But the firm can stave off competition and continue to earn economic profits if

In the long run,what happens to the demand curve facing a monopolistically competitive firm that is earning short-run profits?

Is a monopolistically competitive firm productively efficient?

One of the assumptions of monopolistic competition is that firms produce differentiated products.What does this assumption imply about the demand curve facing a representative firm?

Figure 10-5 -Refer to Figure 10-5.The chocolate store represented in the diagram is currently selling Qa units of candy at a price of Pa.Is this candy store maximising its profit and if it is not,what would you recommend to the firm?

Figure 10-7 Figure 10-7 shows short-run cost and demand curves for a monopolistically competitive firm in the footwear market. -Refer to Figure 10-7.Which of the following is the area that represents the profit or loss experienced by the firm?

Tony's Italian Ice is a monopolistically competitive firm.If Tony's earns a profit in the short run,which of the following is most likely to occur?

Monopolistically competitive firms achieve allocative efficiency but not productive efficiency.

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

Figure 10-5 -Refer to Figure 10-5.The chocolate store represented in the diagram is currently selling Q_a units of candy at a price of P_a.Is this candy store maximising its profit and if it is not,what would you recommend to the firm?