Question 1

A monopolistically competitive market is described as one in which there are

Accepted Answer

A)  a few firms producing an identical product. 
B)  a large number of firms selling similar, but not identical, products. 
C)  a few firms producing differentiated products. 
D)  one large firm and many small firms producing identical products. 
A)  a few firms producing an identical product. 
B)  a large number of firms selling similar, but not identical, products. 
C)  a few firms producing differentiated products. 
D)  one large firm and many small firms producing identical products.

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

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 4

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 5

Figure 13-6  
-Refer to Figure 13-6.Suppose Dell finds the relationship between the average total cost of producing notebook computers and the quantity of notebook computers produced is as shown by Figure 13-2.Dell will maximize profits if it produces ________ notebook computers per month.

Accepted Answer

A)  100,000 
B)  200,000 
C)  300,000 
D)  Not enough information is given to determine the profit-maximizing quantity. 
A)  100,000 
B)  200,000 
C)  300,000 
D)  Not enough information is given to determine the profit-maximizing quantity.

Question 6

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; pr

Question 7

Which of the following would not occur as a result of a monopolistically competitive firm suffering a short-run economic loss?

Accepted Answer

A)  The firm could exit the industry in the long run. 
B)  If the firm does not exit the industry in the long run its demand curve will shift to the left. 
C)  If the firm does not exit the industry in the long run its demand curve will shift to the right. 
D)  If the firm remains in the industry in the long run it will break even. 
A)  The firm could exit the industry in the long run. 
B)  If the firm does not exit the industry in the long run its demand curve will shift to the left. 
C)  If the firm does not exit the industry in the long run its demand curve will shift to the right. 
D)  If the firm remains in the industry in the long run it will break even.

Question 8

Because the monopolistically competitive firm faces a ________ demand curve for its product,it ________ the price of its output.

Accepted Answer

A)  downward-sloping; cannot influence 
B)  horizontal; can influence 
C)  horizontal; cannot influence 
D)  downward-sloping; can influence 
A)  downward-sloping; cannot influence 
B)  horizontal; can influence 
C)  horizontal; cannot influence 
D)  downward-sloping; can influence

Question 9

In the highly competitive fast-food restaurant market,brand name restaurants have a strong profit incentive to maintain high sanitary conditions and avoid any negative consequences.

Accepted Answer

A) True 
 B)False

Question 10

Explain the similarities and differences between the long-run equilibrium for a perfectly competitive firm and a monopolistically competitive firm.Illustrate your answer with a graph demonstrating the long run equilibrium for the two types of firms.

Accepted Answer

@#IMG-DLM& Refer to the graph above.For both types

Question 11

For a profit-maximizing monopolistically competitive firm,for the last unit sold,the marginal cost of production is less than the marginal benefit received by a customer from the purchase of that unit.

Accepted Answer

A) True 
 B)False

Question 12

When a firm has been granted a trademark,which grants legal protection against other firms using the name of the product that has been granted the trademark,the firm

Accepted Answer

A)  still faces the possibility that the name will become widely used and no longer associated with a specific company. 
B)  does not have to worry about legally enforcing the trademark; this is the responsibility of the legal system. 
C)  still must apply for a copyright and a patent to ensure that no other firm will use the product's name. 
D)  must spend an annual amount on advertising the product each year; the amount it must spend is negotiated by the firm and the government agency that grants the trademark. 
A)  still faces the possibility that the name will become widely used and no longer associated with a specific company. 
B)  does not have to worry about legally enforcing the trademark; this is the responsibility of the legal system. 
C)  still must apply for a copyright and a patent to ensure that no other firm will use the product's name. 
D)  must spend an annual amount on advertising the product each year; the amount it must spend is negotiated by the firm and the government agency that grants the trademark.

Question 13

How does the long run equilibrium of a monopolistically competitive industry differ from that of a perfectly competitive industry?

Accepted Answer

A)  A firm in monopolistic competition will earn economic profits but a firm in perfect competition earns zero profit. 
B)  A firm in monopolistic competition will charge a price higher than the average cost of production but a firm in perfect competition charges a price equal to the average cost of production. 
C)  A firm in monopolistic competition does not take full advantage of its economies of scale but a firm in perfect competition produces at the lowest average cost possible. 
D)  A firm in monopolistic competition produces an allocatively efficient output level while a firm in perfect competition produces a productively efficient output level. 
A)  A firm in monopolistic competition will earn economic profits but a firm in perfect competition earns zero profit. 
B)  A firm in monopolistic competition will charge a price higher than the average cost of production but a firm in perfect competition charges a price equal to the average cost of production. 
C)  A firm in monopolistic competition does not take full advantage of its economies of scale but a firm in perfect competition produces at the lowest average cost possible. 
D)  A firm in monopolistic competition produces an allocatively efficient output level while a firm in perfect competition produces a productively efficient output level.

Question 14

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.

Question 15

If buyers of a monopolistically competitive product feel the products of different sellers have little differences between them,then the demand for each seller's product is relatively elastic.

Accepted Answer

A) True 
 B)False

Question 16

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 17

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 18

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 19

New firms are able to enter monopolistically competitive markets because there are low barriers to entry.

Accepted Answer

A) True 
 B)False

Question 20

Figure 13-4   Figure 13-4 shows short-run cost and demand curves for a monopolistically competitive firm in the market for designer watches.
-Refer to Figure 13-4.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

A monopolistically competitive market is described as one in which there are

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.

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

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

Figure 13-6 -Refer to Figure 13-6.Suppose Dell finds the relationship between the average total cost of producing notebook computers and the quantity of notebook computers produced is as shown by Figure 13-2.Dell will maximize profits if it produces ________ notebook computers per month.

Which of the following would not occur as a result of a monopolistically competitive firm suffering a short-run economic loss?

Because the monopolistically competitive firm faces a demand curve for its product,it the price of its output.

In the highly competitive fast-food restaurant market,brand name restaurants have a strong profit incentive to maintain high sanitary conditions and avoid any negative consequences.

Explain the similarities and differences between the long-run equilibrium for a perfectly competitive firm and a monopolistically competitive firm.Illustrate your answer with a graph demonstrating the long run equilibrium for the two types of firms.

For a profit-maximizing monopolistically competitive firm,for the last unit sold,the marginal cost of production is less than the marginal benefit received by a customer from the purchase of that unit.

When a firm has been granted a trademark,which grants legal protection against other firms using the name of the product that has been granted the trademark,the firm

How does the long run equilibrium of a monopolistically competitive industry differ from that of a perfectly competitive industry?

The demand curve of a monopolistically competitive firm

If buyers of a monopolistically competitive product feel the products of different sellers have little differences between them,then the demand for each seller's product is relatively elastic.

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.

New firms are able to enter monopolistically competitive markets because there are low barriers to entry.

Figure 13-4 Figure 13-4 shows short-run cost and demand curves for a monopolistically competitive firm in the market for designer watches. -Refer to Figure 13-4.What is the area that represents the loss made by the 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

Filters

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

A monopolistically competitive market is described as one in which there are

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.

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

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

Figure 13-6 -Refer to Figure 13-6.Suppose Dell finds the relationship between the average total cost of producing notebook computers and the quantity of notebook computers produced is as shown by Figure 13-2.Dell will maximize profits if it produces ________ notebook computers per month.

Which of the following would not occur as a result of a monopolistically competitive firm suffering a short-run economic loss?

Because the monopolistically competitive firm faces a ________ demand curve for its product,it ________ the price of its output.

In the highly competitive fast-food restaurant market,brand name restaurants have a strong profit incentive to maintain high sanitary conditions and avoid any negative consequences.

Explain the similarities and differences between the long-run equilibrium for a perfectly competitive firm and a monopolistically competitive firm.Illustrate your answer with a graph demonstrating the long run equilibrium for the two types of firms.

For a profit-maximizing monopolistically competitive firm,for the last unit sold,the marginal cost of production is less than the marginal benefit received by a customer from the purchase of that unit.

When a firm has been granted a trademark,which grants legal protection against other firms using the name of the product that has been granted the trademark,the firm

How does the long run equilibrium of a monopolistically competitive industry differ from that of a perfectly competitive industry?

The demand curve of a monopolistically competitive firm

If buyers of a monopolistically competitive product feel the products of different sellers have little differences between them,then the demand for each seller's product is relatively elastic.

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.

New firms are able to enter monopolistically competitive markets because there are low barriers to entry.

Figure 13-4 Figure 13-4 shows short-run cost and demand curves for a monopolistically competitive firm in the market for designer watches. -Refer to Figure 13-4.What is the area that represents the loss made by the 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

Filters

Because the monopolistically competitive firm faces a demand curve for its product,it the price of its output.