Question 1

The Do It Yourself Hardware Store is a monopolistically competitive firm. Its marginal revenue curve

Accepted Answer

A)  is identical to its demand curve. 
B)  lies below its demand curve intersecting the quantity axis at the same point at which the demand curve intersects it. 
C)  lies below its demand curve intersecting the quantity axis midway between the origin and the point at which the demand curve intersects it. 
D)  is below its demand curve if demand is elastic and above the demand curve if demand is inelastic. 
A)  is identical to its demand curve. 
B)  lies below its demand curve intersecting the quantity axis at the same point at which the demand curve intersects it. 
C)  lies below its demand curve intersecting the quantity axis midway between the origin and the point at which the demand curve intersects it. 
D)  is below its demand curve if demand is elastic and above the demand curve if demand is inelastic. C

Question 2

Vertical differentiation makes products better for some consumers and worse for others.

Accepted Answer

A) True 
 B)False  False

Question 3

The Internet has had a significant influence on advertising in all of the following ways EXCEPT:

Accepted Answer

A)  the Internet allows firms to actively interact with customers. 
B)  the Internet has improved firms' ability to target specific markets. 
C)  the Internet has reduced the level and transparency of informational advertising. 
D)  the Internet has reduced spending on advertising. 
A)  the Internet allows firms to actively interact with customers. 
B)  the Internet has improved firms' ability to target specific markets. 
C)  the Internet has reduced the level and transparency of informational advertising. 
D)  the Internet has reduced spending on advertising. C

Question 4

Product differentiation that makes the product better for some consumers and worse for others is

Accepted Answer

A)  always welfare decreasing. 
B)  vertical differentiation. 
C)  horizontal differentiation. 
D)  never undertaken by firms. 
A)  always welfare decreasing. 
B)  vertical differentiation. 
C)  horizontal differentiation. 
D)  never undertaken by firms.

Question 5

Mama Lena's, a frozen food producer, is a monopolistically competitive firm. Mama Lena's is currently selling frozen lasagna at a price of $10. Mama Lena's marginal cost is $5 and marginal revenue is $5. This firm should ________ to maximize profits in the short run.

Accepted Answer

A)  increase output to where price just equals marginal cost 
B)  decrease output to where price just equals marginal cost 
C)  continue to produce the same output level 
D)  Indeterminate from the given information. 
A)  increase output to where price just equals marginal cost 
B)  decrease output to where price just equals marginal cost 
C)  continue to produce the same output level 
D)  Indeterminate from the given information.

Question 6

Refer to the information provided in Figure 15.2 below to answer the questions that follow.   Figure 15.2
-Refer to Figure 15.2. In this monopolistically competitive industry, in the long run,

Accepted Answer

A)  firms will enter until all firms earn a normal profit. 
B)  firms will continue to earn economic profits. 
C)  demand for the product will decrease so that profits are decreased. 
D)  the government will impose price controls to eliminate any economic profits. 
A)  firms will enter until all firms earn a normal profit. 
B)  firms will continue to earn economic profits. 
C)  demand for the product will decrease so that profits are decreased. 
D)  the government will impose price controls to eliminate any economic profits.

Question 7

Refer to the information provided in Figure 15.5 below to answer the questions that follow.   Figure 15.5
-Refer to Figure 15.5. If the Custom Sweater Shop is monopolistically competitive, what is the minimum level of fixed cost that would lead to the firm continuing to operate in the short run?

Accepted Answer

A)  $400 
B)  $4600 
C)  $5000 
D)  The firm would continue to operate regardless of the level of fixed costs. 
A)  $400 
B)  $4600 
C)  $5000 
D)  The firm would continue to operate regardless of the level of fixed costs.

Question 8

Refer to the information provided in Figure 15.5 below to answer the questions that follow.   Figure 15.5
-Refer to Figure 15.5. Assume the Custom Sweater Shop has fixed costs of $500 and is a monopolistically competitive firm. If this firm is producing the profit-maximizing level of output and selling it at the profit-maximizing price, the firm's profit is

Accepted Answer

A)  -$400. 
B)  -$350. 
C)  -$500. 
D)  -$50. 
A)  -$400. 
B)  -$350. 
C)  -$500. 
D)  -$50.

Question 9

Monopolistically competitive firms are unable to affect the market price of their output, but are able to control the price of their own output.

Accepted Answer

A) True 
 B)False

Question 10

A monopolistically competitive firm

Accepted Answer

A)  can sell an infinite amount of output at the market-determined price. 
B)  must lower price to sell more output. 
C)  must raise price to sell more output. 
D)  sells a fixed amount of output regardless of price. 
A)  can sell an infinite amount of output at the market-determined price. 
B)  must lower price to sell more output. 
C)  must raise price to sell more output. 
D)  sells a fixed amount of output regardless of price.

Question 11

Refer to the information provided in Figure 15.4 below to answer the questions that follow.   Figure 15.4
-Refer to Figure 15.4. Assume The Hand Made Shirt Shop has fixed costs of $150 and is a monopolistically competitive firm. To maximize profits in the short run, this firm should produce ________ personalized sweatshirts.

Accepted Answer

A)  0 
B)  50 
C)  70 
D)  75 
A)  0 
B)  50 
C)  70 
D)  75

Question 12

Since a monopolistically competitive firm has a monopoly over the particular product it produces, the firm is guaranteed a profit in the long run.

Accepted Answer

A) True 
 B)False

Question 13

The Specialty Cake Store, a monopolistically competitive firm, is producing 200 decorated cakes per day and selling each cake for $17. At that production level, ATC is $20, AVC is $15, AFC is $5, and both MR and MC are $8. This firm should

Accepted Answer

A)  continue to produce 200 cakes, as price is greater than AVC. 
B)  increase output to the point where price equals marginal cost. 
C)  decrease output to the point where price equals average total cost. 
D)  shutdown and produce zero cakes and just pay fixed costs. 
A)  continue to produce 200 cakes, as price is greater than AVC. 
B)  increase output to the point where price equals marginal cost. 
C)  decrease output to the point where price equals average total cost. 
D)  shutdown and produce zero cakes and just pay fixed costs.

Question 14

A monopolistically competitive firm that is incurring a loss will shut down if

Accepted Answer

A)  marginal revenue is less than marginal cost. 
B)  revenues are less than variable costs. 
C)  price is less than average total cost. 
D)  price is less than marginal cost. 
A)  marginal revenue is less than marginal cost. 
B)  revenues are less than variable costs. 
C)  price is less than average total cost. 
D)  price is less than marginal cost.

Question 15

In general, the demand curve facing the monopolistically competitive firm is more elastic than the demand curve facing the monopoly.

Accepted Answer

A) True 
 B)False

Question 16

A monopolistically competitive firm maximizes profit by producing where marginal revenue equals marginal cost.

Accepted Answer

A) True 
 B)False

Question 17

Monopolistically competitive firms fail to fully realize their economies of scale.

Accepted Answer

A) True 
 B)False

Question 18

Refer to the information provided in Figure 15.2 below to answer the questions that follow.   Figure 15.2
-Refer to Figure 15.2. If We Do Hair is maximizing profit as a monopolistically competitive firm, its total revenue equals

Accepted Answer

A)  $1,280. 
B)  $1,320. 
C)  $1,200. 
D)  $600. 
A)  $1,280. 
B)  $1,320. 
C)  $1,200. 
D)  $600.

Question 19

The case AGAINST advertising includes the fact that

Accepted Answer

A)  firms spend large sums of money to create artificial differences among products. 
B)  it provides consumers with valuable information about product availability, quality, and price. 
C)  it increases competition by decreasing barriers to entry of new firms into an industry. 
D)  it ensures high quality and efficient production. 
A)  firms spend large sums of money to create artificial differences among products. 
B)  it provides consumers with valuable information about product availability, quality, and price. 
C)  it increases competition by decreasing barriers to entry of new firms into an industry. 
D)  it ensures high quality and efficient production.

Question 20

Refer to the information provided in Figure 15.4 below to answer the questions that follow.   Figure 15.4
-Refer to Figure 15.4. Assume The Hand Made Shirt Shop has fixed costs of $150 and is a monopolistically competitive firm. If this firm is producing the profit-maximizing level of output and selling it at the profit-maximizing price, the firm's profit is

Accepted Answer

A)  -$250. 
B)  -$150. 
C)  -$100. 
D)  -$50. 
A)  -$250. 
B)  -$150. 
C)  -$100. 
D)  -$50.

The Do It Yourself Hardware Store is a monopolistically competitive firm. Its marginal revenue curve

Vertical differentiation makes products better for some consumers and worse for others.

The Internet has had a significant influence on advertising in all of the following ways EXCEPT:

Product differentiation that makes the product better for some consumers and worse for others is

Mama Lena's, a frozen food producer, is a monopolistically competitive firm. Mama Lena's is currently selling frozen lasagna at a price of $10. Mama Lena's marginal cost is $5 and marginal revenue is $5. This firm should ________ to maximize profits in the short run.

Refer to the information provided in Figure 15.2 below to answer the questions that follow. Figure 15.2 -Refer to Figure 15.2. In this monopolistically competitive industry, in the long run,

Refer to the information provided in Figure 15.5 below to answer the questions that follow. Figure 15.5 -Refer to Figure 15.5. If the Custom Sweater Shop is monopolistically competitive, what is the minimum level of fixed cost that would lead to the firm continuing to operate in the short run?

Monopolistically competitive firms are unable to affect the market price of their output, but are able to control the price of their own output.

A monopolistically competitive firm

Since a monopolistically competitive firm has a monopoly over the particular product it produces, the firm is guaranteed a profit in the long run.

The Specialty Cake Store, a monopolistically competitive firm, is producing 200 decorated cakes per day and selling each cake for $17. At that production level, ATC is $20, AVC is $15, AFC is $5, and both MR and MC are $8. This firm should

A monopolistically competitive firm that is incurring a loss will shut down if

In general, the demand curve facing the monopolistically competitive firm is more elastic than the demand curve facing the monopoly.

A monopolistically competitive firm maximizes profit by producing where marginal revenue equals marginal cost.

Monopolistically competitive firms fail to fully realize their economies of scale.

Refer to the information provided in Figure 15.2 below to answer the questions that follow. Figure 15.2 -Refer to Figure 15.2. If We Do Hair is maximizing profit as a monopolistically competitive firm, its total revenue equals

The case AGAINST advertising includes the fact that

The Scope and Method of Economics

The Economic Problem: Scarcity and Choice

Demand, Supply, and Market Equilibrium

Demand and Supply Applications

Elasticity

Household Behavior and Consumer Choice

The Production Process: the Behavior of Profit-Maximizing Firms

Short-Run Costs and Output Decisions

Long-Run Costs and Output Decisions

Input Demand: the Labor and Land Markets

Input Demand: the Capital Market and the Investment Decision

General Equilibrium and the Efficiency of Perfect Competition

Monopoly and Antitrust Policy

Oligopoly

Externalities, Public Goods, and Social Choice

Uncertainty and Asymmetric Information

Income Distribution and Poverty

Public Finance: The Economics of Taxation

International Trade, Comparative Advantage, and Protectionism

Economic Growth in Developing and Transitional Economies

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Exam 15: Monopolistic Competition

The Do It Yourself Hardware Store is a monopolistically competitive firm. Its marginal revenue curve

Vertical differentiation makes products better for some consumers and worse for others.

The Internet has had a significant influence on advertising in all of the following ways EXCEPT:

Product differentiation that makes the product better for some consumers and worse for others is

Mama Lena's, a frozen food producer, is a monopolistically competitive firm. Mama Lena's is currently selling frozen lasagna at a price of $10. Mama Lena's marginal cost is $5 and marginal revenue is $5. This firm should ________ to maximize profits in the short run.

Refer to the information provided in Figure 15.2 below to answer the questions that follow. Figure 15.2 -Refer to Figure 15.2. In this monopolistically competitive industry, in the long run,

Refer to the information provided in Figure 15.5 below to answer the questions that follow. Figure 15.5 -Refer to Figure 15.5. If the Custom Sweater Shop is monopolistically competitive, what is the minimum level of fixed cost that would lead to the firm continuing to operate in the short run?

Monopolistically competitive firms are unable to affect the market price of their output, but are able to control the price of their own output.

A monopolistically competitive firm

Since a monopolistically competitive firm has a monopoly over the particular product it produces, the firm is guaranteed a profit in the long run.

The Specialty Cake Store, a monopolistically competitive firm, is producing 200 decorated cakes per day and selling each cake for $17. At that production level, ATC is $20, AVC is $15, AFC is $5, and both MR and MC are $8. This firm should

A monopolistically competitive firm that is incurring a loss will shut down if

In general, the demand curve facing the monopolistically competitive firm is more elastic than the demand curve facing the monopoly.

A monopolistically competitive firm maximizes profit by producing where marginal revenue equals marginal cost.

Monopolistically competitive firms fail to fully realize their economies of scale.

Refer to the information provided in Figure 15.2 below to answer the questions that follow. Figure 15.2 -Refer to Figure 15.2. If We Do Hair is maximizing profit as a monopolistically competitive firm, its total revenue equals

The case AGAINST advertising includes the fact that

The Scope and Method of Economics

The Economic Problem: Scarcity and Choice

Demand, Supply, and Market Equilibrium

Demand and Supply Applications

Elasticity

Household Behavior and Consumer Choice

The Production Process: the Behavior of Profit-Maximizing Firms

Short-Run Costs and Output Decisions

Long-Run Costs and Output Decisions

Input Demand: the Labor and Land Markets

Input Demand: the Capital Market and the Investment Decision

General Equilibrium and the Efficiency of Perfect Competition

Monopoly and Antitrust Policy

Oligopoly

Externalities, Public Goods, and Social Choice

Uncertainty and Asymmetric Information

Income Distribution and Poverty

Public Finance: The Economics of Taxation

International Trade, Comparative Advantage, and Protectionism

Economic Growth in Developing and Transitional Economies

Filters