Question 1

Which factor is NOT a source of product differentiation?

Accepted Answer

A)  price 
B)  location 
C)  style 
D)  quality 
A)  price 
B)  location 
C)  style 
D)  quality A

Question 2

Use the following to answer questions :
Figure: Profit Maximization for a Firm in Monopolistic Competition  
-(Figure: Profit Maximization for a Firm in Monopolistic Competition)Use Figure: Profit Maximization for a Firm in Monopolistic Competition.Suppose that an innovation reduces a firm's costs from ATC to ATCF1F1F1S1F1F1F10.After the innovation reduces the cost,the firm's economic profit at the new profit-maximizing quantity is:

Accepted Answer

A)  $0. 
B)  $30. 
C)  $1 500. 
D)  $3 000. 
A)  $0. 
B)  $30. 
C)  $1 500. 
D)  $3 000. C

Question 3

To maximize profit,a monopolistically competitive firm should produce the level of output at which:

Accepted Answer

A)  marginal revenue equals marginal cost. 
B)  price equals marginal cost. 
C)  price equals total cost. 
D)  marginal revenue equals price. 
A)  marginal revenue equals marginal cost. 
B)  price equals marginal cost. 
C)  price equals total cost. 
D)  marginal revenue equals price. A

Question 4

Long-run equilibrium in perfect competition and in monopolistic competition are similar because in both models,firms _____ in the long run.

Accepted Answer

A)  produce at the minimum point of the average total cost curve 
B)  set price equal to marginal cost 
C)  make zero economic profits 
D)  have excess capacity 
A)  produce at the minimum point of the average total cost curve 
B)  set price equal to marginal cost 
C)  make zero economic profits 
D)  have excess capacity

Question 5

In the long run,monopolistic competitors will:

Accepted Answer

A)  earn zero economic profits. 
B)  produce at the minimum of their ATC curves. 
C)  set price where MC = MR. 
D)  collude with other firms. 
A)  earn zero economic profits. 
B)  produce at the minimum of their ATC curves. 
C)  set price where MC = MR. 
D)  collude with other firms.

Question 6

Use the following to answer questions :
Figure: Profit Maximization in Monopolistic Competition  
-(Figure: Profit Maximization in Monopolistic Competition)Use Figure: Profit Maximization in Monopolistic Competition.In panel (a)of the figure,the profit-maximizing price and quantity are _____ and _____.

Accepted Answer

A)  S;M 
B)  P;M 
C)  P;Q 
D)  T;Q 
A)  S;M 
B)  P;M 
C)  P;Q 
D)  T;Q

Question 7

Use the following to answer questions :
Figure: The Restaurant Market  
-The model of monopolistic competition characterizes a city's market for plumbing services.Suppose that the market is initially in long-run equilibrium,and then overall demand for plumbing services increases.In the short run,the price for plumbing services will _____ and the total output in the market will _____.

Accepted Answer

A)  fall;fall 
B)  not change;not change 
C)  rise;rise 
D)  rise;fall 
A)  fall;fall 
B)  not change;not change 
C)  rise;rise 
D)  rise;fall

Question 8

Competition among sellers in monopolistic competition means that all of the firms in the industry will produce the same product.

Accepted Answer

A) True 
 B)False

Question 9

A feature of monopolistic competition that makes it different from monopoly is the:

Accepted Answer

A)  fact that firms in monopolistically competitive industries follow the marginal decision rule,while monopolies do not. 
B)  downward-sloping demand curve. 
C)  downward-sloping marginal revenue curve. 
D)  number of firms in the industry. 
A)  fact that firms in monopolistically competitive industries follow the marginal decision rule,while monopolies do not. 
B)  downward-sloping demand curve. 
C)  downward-sloping marginal revenue curve. 
D)  number of firms in the industry.

Question 10

Because most communities have a large number of similar but not identical substitutes,the market for florists is BEST considered to be:

Accepted Answer

A)  a monopoly. 
B)  an oligopoly. 
C)  monopolistically competitive. 
D)  perfectly competitive. 
A)  a monopoly. 
B)  an oligopoly. 
C)  monopolistically competitive. 
D)  perfectly competitive.

Question 11

Use the following to answer questions :
Scenario: Monopolistically Competitive Firm
For a monopolistically competitive firm,the demand curve is given by Q = 160 - P,and the firm's cost functions are MC = 20 + 2Q and TC = 20Q + QS1U1P12 S1S1P0+ 20.
-(Scenario: Monopolistically Competitive Firm)Use Scenario: Monopolistically Competitive Firm.Given the information in the scenario,in the short run,this firm:

Accepted Answer

A)  earns profits of $2 430. 
B)  incurs losses of $2 450. 
C)  earns no profit. 
D)  incurs losses of $20. 
A)  earns profits of $2 430. 
B)  incurs losses of $2 450. 
C)  earns no profit. 
D)  incurs losses of $20.

Question 12

Use the following to answer questions :
Figure: Monopolistic Competitor  
-(Figure: Monopolistic Competitor)Use Figure: Monopolistic Competitor.The firm shown in the figure may engage in advertising because:

Accepted Answer

A)  it does not know any better. 
B)  its price is greater than its MC. 
C)  its profits are negative. 
D)  this will decrease its excess capacity levels. 
A)  it does not know any better. 
B)  its price is greater than its MC. 
C)  its profits are negative. 
D)  this will decrease its excess capacity levels.

Question 13

In long-run equilibrium in perfect competition,marginal cost is:

Accepted Answer

A)  greater than price. 
B)  equal to price. 
C)  less than price. 
D)  related to price but not in a predictable way. 
A)  greater than price. 
B)  equal to price. 
C)  less than price. 
D)  related to price but not in a predictable way.

Question 14

A(n)_____ market has a single firm and _____,whereas a(n)_____ market has _____ firm(s)and _____.

Accepted Answer

A)  oligopolistic;no barriers to entry;monopolistic;many;easy entry and exit 
B)  monopolistic;barriers to entry;monopolistically competitive;many;easy entry and exit 
C)  monopolistic;barriers to entry;oligopolistic;few;no barriers to entry 
D)  monopolistically competitive;barriers to entry;monopolistic;one;barriers to entry 
A)  oligopolistic;no barriers to entry;monopolistic;many;easy entry and exit 
B)  monopolistic;barriers to entry;monopolistically competitive;many;easy entry and exit 
C)  monopolistic;barriers to entry;oligopolistic;few;no barriers to entry 
D)  monopolistically competitive;barriers to entry;monopolistic;one;barriers to entry

Question 15

If the toothpaste market is monopolistically competitive,product differentiation would NOT take the form of:

Accepted Answer

A)  production of many varieties of toothpaste,including those with whitening agents. 
B)  differentiation in the locations where certain toothpastes are available. 
C)  quality differences among the various brands. 
D)  setting the price of the product well below the price charged by the rivals. 
A)  production of many varieties of toothpaste,including those with whitening agents. 
B)  differentiation in the locations where certain toothpastes are available. 
C)  quality differences among the various brands. 
D)  setting the price of the product well below the price charged by the rivals.

Question 16

In monopolistic competition,each firm:

Accepted Answer

A)  is a price-taker. 
B)  has some ability to set the price of its differentiated good. 
C)  will set price equal to marginal cost. 
D)  has a marginal revenue that is greater than price. 
A)  is a price-taker. 
B)  has some ability to set the price of its differentiated good. 
C)  will set price equal to marginal cost. 
D)  has a marginal revenue that is greater than price.

Question 17

Use the following to answer questions :
Figure: The Market for Gas Stations  
-(Figure: The Market for Gas Stations)Use Figure: The Market for Gas Stations.The figure shows curves facing a typical gas station in a large town.The market is characterized by many firms,differentiated products,easy entry,and easy exit.If the gas station here is typical,prices charged by firms in the market are likely to:

Accepted Answer

A)  fall in the long run. 
B)  rise in the long run. 
C)  remain unchanged. 
D)  rise dramatically in the long run. 
A)  fall in the long run. 
B)  rise in the long run. 
C)  remain unchanged. 
D)  rise dramatically in the long run.

Question 18

In monopolistic competition,the primary source of product differentiation is price competition.

Accepted Answer

A) True 
 B)False

Question 19

Use the following to answer question 87:
Figure: Possible Long-Run Outcome  
-General Snacks is a typical firm in monopolistic competition.Initially,the market is in long-run equilibrium,and then there is an increase in the market demand for snacks.In the long run,the economic profits of typical firms in the industry will be:

Accepted Answer

A)  typical of those earned by monopoly firms. 
B)  positive but less than the level typically earned by monopoly firms. 
C)  zero. 
D)  negative. 
A)  typical of those earned by monopoly firms. 
B)  positive but less than the level typically earned by monopoly firms. 
C)  zero. 
D)  negative.

Question 20

Use the following to answer questions :
Figure: Firms in Monopolistic Competition  
-(Figure: Firms in Monopolistic Competition)Use Figure: Firms in Monopolistic Competition.In panel (b)of the figure,the profit-maximizing quantity of output is determined by the intersection at point:

Accepted Answer

A)  Q. 
B)  R. 
C)  S. 
D)  T. 
A)  Q. 
B)  R. 
C)  S. 
D)  T.

Which factor is NOT a source of product differentiation?

To maximize profit,a monopolistically competitive firm should produce the level of output at which:

Long-run equilibrium in perfect competition and in monopolistic competition are similar because in both models,firms _____ in the long run.

In the long run,monopolistic competitors will:

Use the following to answer questions : Figure: Profit Maximization in Monopolistic Competition -(Figure: Profit Maximization in Monopolistic Competition)Use Figure: Profit Maximization in Monopolistic Competition.In panel (a)of the figure,the profit-maximizing price and quantity are _ and _.

Competition among sellers in monopolistic competition means that all of the firms in the industry will produce the same product.

A feature of monopolistic competition that makes it different from monopoly is the:

Because most communities have a large number of similar but not identical substitutes,the market for florists is BEST considered to be:

Use the following to answer questions : Figure: Monopolistic Competitor -(Figure: Monopolistic Competitor)Use Figure: Monopolistic Competitor.The firm shown in the figure may engage in advertising because:

In long-run equilibrium in perfect competition,marginal cost is:

A(n)___ market has a single firm and _,whereas a(n)_ market has _ firm(s)and ___.

If the toothpaste market is monopolistically competitive,product differentiation would NOT take the form of:

In monopolistic competition,each firm:

In monopolistic competition,the primary source of product differentiation is price competition.

Use the following to answer questions : Figure: Firms in Monopolistic Competition -(Figure: Firms in Monopolistic Competition)Use Figure: Firms in Monopolistic Competition.In panel (b)of the figure,the profit-maximizing quantity of output is determined by the intersection at point:

First Principles

Economic Models

Supply and Demand

Consumer and Producer Surplus

Price Controls and Quotas

Elasticity

Taxes

International Trade

Decision Making by Individuals and Firms

The Rational Consumer

Behind the Supply Curve- Inputs and Costs

Perfect Competition and the Supply Curve

Monopoly

Oligopoly

Externalities

Public Goods and Common Resources

The Economics of the Welfare State

Factor Markets and the Distribution of Income

Uncertainty, risk, and Private Information

Graphs in Economics

Consumer Preferences

Indifference Curve Analysis

Filters

Exam 15: Monopolistic Competition

Which factor is NOT a source of product differentiation?

To maximize profit,a monopolistically competitive firm should produce the level of output at which:

Long-run equilibrium in perfect competition and in monopolistic competition are similar because in both models,firms _____ in the long run.

In the long run,monopolistic competitors will:

Competition among sellers in monopolistic competition means that all of the firms in the industry will produce the same product.

A feature of monopolistic competition that makes it different from monopoly is the:

Because most communities have a large number of similar but not identical substitutes,the market for florists is BEST considered to be:

Use the following to answer questions : Figure: Monopolistic Competitor -(Figure: Monopolistic Competitor)Use Figure: Monopolistic Competitor.The firm shown in the figure may engage in advertising because:

In long-run equilibrium in perfect competition,marginal cost is:

A(n)_____ market has a single firm and _____,whereas a(n)_____ market has _____ firm(s)and _____.

If the toothpaste market is monopolistically competitive,product differentiation would NOT take the form of:

In monopolistic competition,each firm:

In monopolistic competition,the primary source of product differentiation is price competition.

Use the following to answer questions : Figure: Firms in Monopolistic Competition -(Figure: Firms in Monopolistic Competition)Use Figure: Firms in Monopolistic Competition.In panel (b)of the figure,the profit-maximizing quantity of output is determined by the intersection at point:

First Principles

Economic Models

Supply and Demand

Consumer and Producer Surplus

Price Controls and Quotas

Elasticity

Taxes

International Trade

Decision Making by Individuals and Firms

The Rational Consumer

Behind the Supply Curve- Inputs and Costs

Perfect Competition and the Supply Curve

Monopoly

Oligopoly

Externalities

Public Goods and Common Resources

The Economics of the Welfare State

Factor Markets and the Distribution of Income

Uncertainty, risk, and Private Information

Graphs in Economics

Consumer Preferences

Indifference Curve Analysis

Filters

A(n)___ market has a single firm and _,whereas a(n)_ market has _ firm(s)and ___.