Question 1

Figure 13-13  
-Refer to Figure 13-13.What is the profit maximizing output level?

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

A monopolistically competitive firm maximizes profit where

Accepted Answer

A)  price = marginal revenue. 
B)  price > marginal cost. 
C)  marginal revenue > average revenue. 
D)  total revenue > marginal cost. 
A)  price = marginal revenue. 
B)  price > marginal cost. 
C)  marginal revenue > average revenue. 
D)  total revenue > marginal cost.

Question 3

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 4

What effect does the entry of new firms in a monopolistically competitive market have on the economic profits of existing firms in the market? How might existing firms attempt to counteract this effect?

Accepted Answer

New firms entering an industry cause the

Question 5

Table 13-4
   Table 13-4 lists estimated revenues and costs (per week) for plastic vials (100 vials per box) for the Victoria Biological Supplies Company. Victoria sells plastic vials to university and private research laboratories.
-Refer to Table 13-4.At Victoria's profit-maximizing output

Accepted Answer

A)  profit equals $2. 
B)  total revenue equals $24 and total cost equals $20. 
C)  total revenue equals $25 and total cost equals $22. 
D)  total revenue equals $21 and total cost equals $17. 
A)  profit equals $2. 
B)  total revenue equals $24 and total cost equals $20. 
C)  total revenue equals $25 and total cost equals $22. 
D)  total revenue equals $21 and total cost equals $17.

Question 6

Excess capacity is a characteristic of monopolistically competitive firms.What does excess capacity mean?

Accepted Answer

A)  It means that firms do not produce the output level that corresponds to the minimum point on their average total cost curves. 
B)  It means that firms hire more than the minimum number of workers needed to produce the profit-maximizing level of output. 
C)  It means that firms produce with inefficient combinations of resources. 
D)  It means that firms build plants that are not large enough to achieve minimum efficient scale. 
A)  It means that firms do not produce the output level that corresponds to the minimum point on their average total cost curves. 
B)  It means that firms hire more than the minimum number of workers needed to produce the profit-maximizing level of output. 
C)  It means that firms produce with inefficient combinations of resources. 
D)  It means that firms build plants that are not large enough to achieve minimum efficient scale.

Question 7

Figure 13-7   Figure 13-7 shows short-run cost and demand curves for a monopolistically competitive firm in the footwear market.
-Refer to Figure 13-7.Which of the following statements describes the best course of action for the firm depicted in the diagram?

Accepted Answer

A)  The firm should exit the industry because its price is less than its average total cost. 
B)  The firm should minimize its losses by producing Qy units and charging a price of P0. 
C)  The firm should minimize its losses by producing Qy units and charging a price of P2. 
D)  The firm should minimize its losses by producing Qy units and charging a price of P1. 
A)  The firm should exit the industry because its price is less than its average total cost. 
B)  The firm should minimize its losses by producing Qy units and charging a price of P0. 
C)  The firm should minimize its losses by producing Qy units and charging a price of P2. 
D)  The firm should minimize its losses by producing Qy units and charging a price of P1.

Question 8

Which of the following is not an example of a monopolistically competitive market?

Accepted Answer

A)  automobile producers 
B)  supermarkets 
C)  video stores 
D)  makers of women's clothing 
A)  automobile producers 
B)  supermarkets 
C)  video stores 
D)  makers of women's clothing

Question 9

Figure 13-17  
-Refer to Figure 13-17.In the long run,why will the firm produce Qf units and not Qg units,which has a lower its average cost of production?

Accepted Answer

A)  Although its average cost of production is lower when the firm produces Qg units, to be able to sell its output the firm will have to charge a price below average cost, resulting in a loss. 
B)  At Qg, average cost exceeds marginal cost so the firm will actually make a loss. 
C)  At Qg, marginal revenue is less than average revenue which will result in a loss for the firm. 
D)  The firm's goal is to charge a high price and make a small profit rather than a low price and no profit. 
A)  Although its average cost of production is lower when the firm produces Qg units, to be able to sell its output the firm will have to charge a price below average cost, resulting in a loss. 
B)  At Qg, average cost exceeds marginal cost so the firm will actually make a loss. 
C)  At Qg, marginal revenue is less than average revenue which will result in a loss for the firm. 
D)  The firm's goal is to charge a high price and make a small profit rather than a low price and no profit.

Question 10

Figure 13-11  
-Refer to Figure 13-11.What is the monopolistic competitor's profit maximizing 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 11

Which of the following is a disadvantage of trademarking a firm's product?

Accepted Answer

A)  A trademark differentiates a firm's product. 
B)  A trademark conveys information about the product to the public. 
C)  A trademark may become so widely used to denote a particular type of product that the trademark may no longer be a legally protected brand name. 
D)  A trademark does not affect demand for the firm's product. 
A)  A trademark differentiates a firm's product. 
B)  A trademark conveys information about the product to the public. 
C)  A trademark may become so widely used to denote a particular type of product that the trademark may no longer be a legally protected brand name. 
D)  A trademark does not affect demand for the firm's product.

Question 12

If a monopolistically competitive firm breaks even,the firm is earning as much in this industry as it could in any other comparable industry.

Accepted Answer

A) True 
 B)False

Question 13

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 14

Figure 13-13  
-Refer to Figure 13-13.Economies of scale are exhausted at which output level?

Accepted Answer

A)  Q1 units 
B)  Q2 units 
C)  Q3 units 
D)  more than Q1 units 
A)  Q1 units 
B)  Q2 units 
C)  Q3 units 
D)  more than Q1 units

Question 15

In the long run,if the demand curve of a monopolistically competitive firm is tangent to its average total cost curve then

Accepted Answer

A)  the firm would break even. 
B)  the firm would shut down temporarily. 
C)  the firm would earn enough revenue to cover its variable costs, but not its fixed costs. 
D)  the firm would earn an economic profit. 
A)  the firm would break even. 
B)  the firm would shut down temporarily. 
C)  the firm would earn enough revenue to cover its variable costs, but not its fixed costs. 
D)  the firm would earn an economic profit.

Question 16

Figure 13-16  
-Refer to Figure 13-16.Figure 13-16 depicts a monopolistically competitive barber shop.Use the diagram to answer the following questions.
a.Suppose the average variable cost of production is $15 when output equals 110 haircuts and $15.25 when output equals 140 haircuts.If the firm wants to maximize its profit or minimize its losses,how many haircuts will it produce and what price should it charge? Explain your answer.
b.Calculate the firm's profit or loss.
c.What is likely to happen in this industry over time as it moves to its new long-run equilibrium?
d.Suppose the barber shop depicted in the diagram remains in the industry.Is this barber shop likely to produce this same quantity of haircuts as in part (a)in the long run?

Accepted Answer

a.Output = 110,Price = $21 whereby MR =

Question 17

A monopolistically competitive firm can convince buyers that its product has value by differentiating its product to suit consumers' preferences.

Accepted Answer

A) True 
 B)False

Question 18

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 19

Figure 13-11  
-Refer to Figure 13-11.The firm represented in the diagram

Accepted Answer

A)  makes zero economic profit. 
B)  makes zero accounting profit. 
C)  should exit the industry. 
D)  should expand its output to take advantage of economies of scale. 
A)  makes zero economic profit. 
B)  makes zero accounting profit. 
C)  should exit the industry. 
D)  should expand its output to take advantage of economies of scale.

Question 20

Figure 13-17  
-Refer to Figure 13-17.What is the amount of excess capacity?

Accepted Answer

A)  Qh - Qf units 
B)  Qj - Qf units 
C)  Qj - Qh units 
D)  Qh - Qg units 
A)  Qh - Qf units 
B)  Qj - Qf units 
C)  Qj - Qh units 
D)  Qh - Qg units

Figure 13-13 -Refer to Figure 13-13.What is the profit maximizing output level?

A monopolistically competitive firm maximizes profit where

When new firms are encouraged to enter a monopolistically competitive market

What effect does the entry of new firms in a monopolistically competitive market have on the economic profits of existing firms in the market? How might existing firms attempt to counteract this effect?

Table 13-4 Table 13-4 lists estimated revenues and costs (per week) for plastic vials (100 vials per box) for the Victoria Biological Supplies Company. Victoria sells plastic vials to university and private research laboratories. -Refer to Table 13-4.At Victoria's profit-maximizing output

Excess capacity is a characteristic of monopolistically competitive firms.What does excess capacity mean?

Figure 13-7 Figure 13-7 shows short-run cost and demand curves for a monopolistically competitive firm in the footwear market. -Refer to Figure 13-7.Which of the following statements describes the best course of action for the firm depicted in the diagram?

Which of the following is not an example of a monopolistically competitive market?

Figure 13-17 -Refer to Figure 13-17.In the long run,why will the firm produce Q_f units and not Q_gunits,which has a lower its average cost of production?

Figure 13-11 -Refer to Figure 13-11.What is the monopolistic competitor's profit maximizing output?

Which of the following is a disadvantage of trademarking a firm's product?

If a monopolistically competitive firm breaks even,the firm is earning as much in this industry as it could in any other comparable industry.

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

Figure 13-13 -Refer to Figure 13-13.Economies of scale are exhausted at which output level?

In the long run,if the demand curve of a monopolistically competitive firm is tangent to its average total cost curve then

A monopolistically competitive firm can convince buyers that its product has value by differentiating its product to suit consumers' preferences.

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

Figure 13-11 -Refer to Figure 13-11.The firm represented in the diagram

Figure 13-17 -Refer to Figure 13-17.What is the amount of excess capacity?

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

Figure 13-13 -Refer to Figure 13-13.What is the profit maximizing output level?

A monopolistically competitive firm maximizes profit where

When new firms are encouraged to enter a monopolistically competitive market

What effect does the entry of new firms in a monopolistically competitive market have on the economic profits of existing firms in the market? How might existing firms attempt to counteract this effect?

Table 13-4 Table 13-4 lists estimated revenues and costs (per week) for plastic vials (100 vials per box) for the Victoria Biological Supplies Company. Victoria sells plastic vials to university and private research laboratories. -Refer to Table 13-4.At Victoria's profit-maximizing output

Excess capacity is a characteristic of monopolistically competitive firms.What does excess capacity mean?

Figure 13-7 Figure 13-7 shows short-run cost and demand curves for a monopolistically competitive firm in the footwear market. -Refer to Figure 13-7.Which of the following statements describes the best course of action for the firm depicted in the diagram?

Which of the following is not an example of a monopolistically competitive market?

Figure 13-17 -Refer to Figure 13-17.In the long run,why will the firm produce Qf units and not Qg units,which has a lower its average cost of production?

Figure 13-11 -Refer to Figure 13-11.What is the monopolistic competitor's profit maximizing output?

Which of the following is a disadvantage of trademarking a firm's product?

If a monopolistically competitive firm breaks even,the firm is earning as much in this industry as it could in any other comparable industry.

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

Figure 13-13 -Refer to Figure 13-13.Economies of scale are exhausted at which output level?

In the long run,if the demand curve of a monopolistically competitive firm is tangent to its average total cost curve then

A monopolistically competitive firm can convince buyers that its product has value by differentiating its product to suit consumers' preferences.

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

Figure 13-11 -Refer to Figure 13-11.The firm represented in the diagram

Figure 13-17 -Refer to Figure 13-17.What is the amount of excess capacity?

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

Figure 13-17 -Refer to Figure 13-17.In the long run,why will the firm produce Q_f units and not Q_gunits,which has a lower its average cost of production?