Question 1

A monopolistically competitive firm faces a downward-sloping demand curve because

Accepted Answer

A)  it is able to control price and quantity demanded. 
B)  there are few substitutes for its product. 
C)  of product differentiation. 
D)  its market decisions are affected by the decisions of its rivals. 
A)  it is able to control price and quantity demanded. 
B)  there are few substitutes for its product. 
C)  of product differentiation. 
D)  its market decisions are affected by the decisions of its rivals.

Question 2

Table 13-2
   Eco Energy is a monopolistically competitive producer of a sports beverage called Power On. Table 13-2 shows the firm's demand and cost schedules.
-Refer to Table 13-2. What is the output (Q) that maximizes profit and what is the price (P) charged?

Accepted Answer

A)  P = $55; Q = 5 cases 
B)  P = $50; Q = 6 cases 
C)  P = $45; Q = 7 cases 
D)  P = $40; Q = 8 cases 
A)  P = $55; Q = 5 cases 
B)  P = $50; Q = 6 cases 
C)  P = $45; Q = 7 cases 
D)  P = $40; Q = 8 cases

Question 3

Figure 13-9  
-Refer to Figure 13-9. Which of the graphs in the figure depicts a monopolistically competitive firm that is earning economic profits?

Accepted Answer

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

Question 4

Figure 13-11  
-Refer to Figure 13-11. The diagram depicts a firm

Accepted Answer

A)  in a constant cost industry. 
B)  in an increasing cost industry. 
C)  in long-run equilibrium. 
D)  that is making short-run losses. 
A)  in a constant cost industry. 
B)  in an increasing cost industry. 
C)  in long-run equilibrium. 
D)  that is making short-run losses.

Question 5

If some monopolistically competitive firms exit their market after suffering short-run losses, the demand curves of remaining firms will shift to the right.

Accepted Answer

A) True 
 B)False

Question 6

A monopolistically competitive firm will

Accepted Answer

A)  charge the same price as its competitors do. 
B)  always produce at the minimum efficient scale of production. 
C)  have some control over its price because its product is differentiated. 
D)  produce an output level that is productively and allocatively efficient. 
A)  charge the same price as its competitors do. 
B)  always produce at the minimum efficient scale of production. 
C)  have some control over its price because its product is differentiated. 
D)  produce an output level that is productively and allocatively efficient.

Question 7

Long-run equilibrium under monopolistic competition is similar to that under perfect competition in that

Accepted Answer

A)  firms produce at the minimum point of their average cost curves. 
B)  price equals marginal cost. 
C)  firms earn normal profits. 
D)  price equals marginal revenue. 
A)  firms produce at the minimum point of their average cost curves. 
B)  price equals marginal cost. 
C)  firms earn normal profits. 
D)  price equals marginal revenue.

Question 8

Figure 13-6  
-Refer to Figure 13-6. Suppose the above graph represents the relationship between the average total cost of producing notebook computers and the quantity of notebook computers produced by Dell. On a graph, illustrate the demand, MR, MC, and ATC curves which would represent Dell maximizing profits at a quantity of 100,000 per month and identify the area on the graph which represents the profit.

Accepted Answer

The answer of Figure 13-6  
-Refer to Figure 13-6....

Question 9

In what way does long-run equilibrium under monopolistic competition differ from long-run equilibrium under perfect competition?

Accepted Answer

A)  Firms in perfect competition achieve productive and allocative efficiency while firms in monopolistic competition achieve neither allocative nor productive efficiency. 
B)  The only difference is that in a monopolistically competitive market there are many brands to choose from while in a perfectly competitive market there is one standard product. 
C)  Firms in perfect competition achieve productive efficiency while firms in monopolistic competition achieve allocative efficiency. 
D)  Firms in perfect competition achieve allocative efficiency while firms in monopolistic competition achieve brand efficiency. 
A)  Firms in perfect competition achieve productive and allocative efficiency while firms in monopolistic competition achieve neither allocative nor productive efficiency. 
B)  The only difference is that in a monopolistically competitive market there are many brands to choose from while in a perfectly competitive market there is one standard product. 
C)  Firms in perfect competition achieve productive efficiency while firms in monopolistic competition achieve allocative efficiency. 
D)  Firms in perfect competition achieve allocative efficiency while firms in monopolistic competition achieve brand efficiency.

Question 10

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 11

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 12

Every firm that has the ability to affect the price of the good or service it sells will

Accepted Answer

A)  have a perfectly elastic demand curve. 
B)  have a marginal revenue curve that lies below its demand curve. 
C)  earn a short-run profit but break even in the long run. 
D)  shut down in the short run. 
A)  have a perfectly elastic demand curve. 
B)  have a marginal revenue curve that lies below its demand curve. 
C)  earn a short-run profit but break even in the long run. 
D)  shut down in the short run.

Question 13

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 14

Which of the following is true for a monopolistically competitive firm in long-run equilibrium?

Accepted Answer

A)  P = ATC and MR = MC. 
B)  P = ATC and P = MC. 
C)  P > ATC and P > MR. 
D)  P > MR and MC = ATC. 
A)  P = ATC and MR = MC. 
B)  P = ATC and P = MC. 
C)  P > ATC and P > MR. 
D)  P > MR and MC = ATC.

Question 15

Which of the following describes a difference between the marginal revenue and demand curves of a perfectly competitive firm and a monopolistically competitive firm?

Accepted Answer

A)  The perfectly competitive firm's marginal revenue and demand curves are the same; the marginal revenue curve of a monopolistically competitive firm lies above its demand curve. 
B)  The perfectly competitive firm's marginal revenue and demand curves are the same; the marginal revenue curve of a monopolistically competitive firm lies below its demand curve. 
C)  The monopolistically competitive firm's marginal revenue and demand curves are the same; the marginal revenue curve of a perfectly competitive firm lies below its demand curve. 
D)  The marginal revenue curve of a monopolistically competitive firm lies below its demand curve; the marginal revenue curve of a perfectly competitive firm lies above its demand curve. 
A)  The perfectly competitive firm's marginal revenue and demand curves are the same; the marginal revenue curve of a monopolistically competitive firm lies above its demand curve. 
B)  The perfectly competitive firm's marginal revenue and demand curves are the same; the marginal revenue curve of a monopolistically competitive firm lies below its demand curve. 
C)  The monopolistically competitive firm's marginal revenue and demand curves are the same; the marginal revenue curve of a perfectly competitive firm lies below its demand curve. 
D)  The marginal revenue curve of a monopolistically competitive firm lies below its demand curve; the marginal revenue curve of a perfectly competitive firm lies above its demand curve.

Question 16

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 17

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 18

Consumers in monopolistically competitive markets face a tradeoff 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 19

Which of the following is true for a firm with a downward-sloping demand curve for its product?

Accepted Answer

A)  Price, average revenue, and marginal revenue are all equal. 
B)  Price, average revenue, and marginal revenue are all different. 
C)  Price equals average revenue but is greater than marginal revenue. 
D)  Price equals average revenue but is less than marginal revenue. 
A)  Price, average revenue, and marginal revenue are all equal. 
B)  Price, average revenue, and marginal revenue are all different. 
C)  Price equals average revenue but is greater than marginal revenue. 
D)  Price equals average revenue but is less than marginal revenue.

Question 20

The demand curve of a monopolistically competitive firm

Accepted Answer

A)  is horizontal because the firm must cut its price to sell more. 
B)  is perfectly elastic. 
C)  is downward sloping because it sells an identical product. 
D)  is downward sloping because it must cut its price to sell more. 
A)  is horizontal because the firm must cut its price to sell more. 
B)  is perfectly elastic. 
C)  is downward sloping because it sells an identical product. 
D)  is downward sloping because it must cut its price to sell more.

Exam 13: Monopolistic Competition: the Competitive Model in a More Realistic Setting

A monopolistically competitive firm faces a downward-sloping demand curve because

Table 13-2 Eco Energy is a monopolistically competitive producer of a sports beverage called Power On. Table 13-2 shows the firm's demand and cost schedules. -Refer to Table 13-2. What is the output (Q) that maximizes profit and what is the price (P) charged?

Figure 13-9 -Refer to Figure 13-9. Which of the graphs in the figure depicts a monopolistically competitive firm that is earning economic profits?

Figure 13-11 -Refer to Figure 13-11. The diagram depicts a firm

If some monopolistically competitive firms exit their market after suffering short-run losses, the demand curves of remaining firms will shift to the right.

A monopolistically competitive firm will

Long-run equilibrium under monopolistic competition is similar to that under perfect competition in that

In what way does long-run equilibrium under monopolistic competition differ from long-run equilibrium under perfect competition?

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

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.

Every firm that has the ability to affect the price of the good or service it sells will

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?

Which of the following is true for a monopolistically competitive firm in long-run equilibrium?

Which of the following describes a difference between the marginal revenue and demand curves of a perfectly competitive firm and a monopolistically competitive firm?

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

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

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

Which of the following is true for a firm with a downward-sloping demand curve for its product?

The demand curve of a monopolistically competitive firm

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

GDP: Measuring Total Production and Income

Unemployment and Inflation

Economic Growth, the Financial System, and Business Cycles

Long-Run Economic Growth: Sources and Policies

Aggregate Expenditure and Output in the Short Run

Aggregate Demand and Aggregate Supply Analysis

Money, Banks, and the Federal Reserve System

Monetary Policy

Fiscal Policy

Inflation, Unemployment, and Federal Reserve Policy

Macroeconomics in an Open Economy

The International Financial System

Filters