Question 1

What is the trade-off that consumers face when buying the product of a monopolistically competitive firm?

Accepted Answer

A) Consumers pay higher prices but receive better quality goods compared to the output of perfectly competitive firms. 
B) Consumers pay a price greater than marginal cost,but have the luxury of choices more suited to their tastes. 
C) Consumers pay higher prices but the products are produced by highly efficient firms. 
D) Consumers pay lower prices but have fewer choices. 
A) Consumers pay higher prices but receive better quality goods compared to the output of perfectly competitive firms. 
B) Consumers pay a price greater than marginal cost,but have the luxury of choices more suited to their tastes. 
C) Consumers pay higher prices but the products are produced by highly efficient firms. 
D) Consumers pay lower prices but have fewer choices.

Question 2

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.Suppose...

Question 3

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 4

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 5

For a monopolistically competitive firm,marginal revenue

Accepted Answer

A) equals the price. 
B) is greater than the price. 
C) is less than the price. 
D) and price are unrelated. 
A) equals the price. 
B) is greater than the price. 
C) is less than the price. 
D) and price are unrelated.

Question 6

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 7

Firms in monopolistic competition compete by selling similar,but not identical products.

Accepted Answer

A) True 
 B)False

Question 8

What is the profit-maximizing rule for a monopolistically competitive firm?

Accepted Answer

A) to produce a quantity that maximizes market share 
B) to produce a quantity that maximizes total revenue 
C) to produce a quantity such that marginal revenue equals marginal cost 
D) to produce a quantity such that price equals marginal cost 
A) to produce a quantity that maximizes market share 
B) to produce a quantity that maximizes total revenue 
C) to produce a quantity such that marginal revenue equals marginal cost 
D) to produce a quantity such that price equals marginal cost

Question 9

Does the fact that monopolistically competitive firms do not achieve productive efficiency or allocative efficiency mean that there is a significant loss in consumer welfare?

Accepted Answer

No.Although monopolistically competitive

Question 10

Figure 13-15  
-Refer to Figure 13-15 to answer the following questions.
a.What is the profit-maximizing output level?
b.What is the profit-maximizing price?
c.What is the average total cost at the profit-maximizing output level?
d.What area represents the firm's profit?
e.At which output level are economies of scale exhausted?
f.Does this graph most likely represent the long run or the short run? Why?

Accepted Answer

a.The profit maximizing level of output

Question 11

A monopolistically competitive firm can increase its profits beyond the long-run equilibrium break-even level by deliberately lowering its price to force some of its competitors out of the market.

Accepted Answer

A) True 
 B)False

Question 12

One reason why the "fast-casual" restaurant market is competitive is that

Accepted Answer

A) demand for "fast -casual" food is very high. 
B) it is trendy and therefore is likely to have a customer following. 
C) barriers to entry are low. 
D) consumption takes place in public. 
A) demand for "fast -casual" food is very high. 
B) it is trendy and therefore is likely to have a customer following. 
C) barriers to entry are low. 
D) consumption takes place in public.

Question 13

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

Accepted Answer

A) P1 
B) P2 
C) P3 
D) P4 
A) P1 
B) P2 
C) P3 
D) P4

Question 14

When a credit card company offers different services with its card,like travel insurance for air travel tickets purchased with the credit card or product insurance for items purchased with the card,the credit card company is trying to

Accepted Answer

A) create a barrier to entry for competing firms. 
B) create a perfectly competitive market in which to sell its credit card. 
C) convince customers that its card has greater value than those offered by rival firms. 
D) shift the demand curve for competing firms to the right. 
A) create a barrier to entry for competing firms. 
B) create a perfectly competitive market in which to sell its credit card. 
C) convince customers that its card has greater value than those offered by rival firms. 
D) shift the demand curve for competing firms to the right.

Question 15

You are planning to open a new Italian restaurant in your hometown where there are three other Italian restaurants.You plan to distinguish your restaurant from your competitors by offering northern Italian cuisine and using locally grown organic produce.What is likely to happen in the restaurant market in your hometown after you open?

Accepted Answer

A) Your competitors are likely to change their menus to make their products more similar to yours. 
B) The demand curve facing each restaurant owner shifts to the right. 
C) The demand curve facing each restaurant owner becomes more elastic. 
D) While the demand curves facing your competitors becomes more elastic,your demand curve will be inelastic. 
A) Your competitors are likely to change their menus to make their products more similar to yours. 
B) The demand curve facing each restaurant owner shifts to the right. 
C) The demand curve facing each restaurant owner becomes more elastic. 
D) While the demand curves facing your competitors becomes more elastic,your demand curve will be inelastic.

Question 16

In monopolistic competition there is/are

Accepted Answer

A) many sellers who each face a downward-sloping demand curve. 
B) a few sellers who each face a downward-sloping demand curve. 
C) only one seller who faces a downward-sloping demand curve. 
D) many sellers who each face a perfectly elastic demand curve. 
A) many sellers who each face a downward-sloping demand curve. 
B) a few sellers who each face a downward-sloping demand curve. 
C) only one seller who faces a downward-sloping demand curve. 
D) many sellers who each face a perfectly elastic demand curve.

Question 17

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 18

Consumers in a monopolistically competitive market do not receive any consumer surplus because the price paid for the product exceeds the marginal cost of production.

Accepted Answer

A) True 
 B)False

Question 19

Unlike a perfectly competitive firm,for a monopolistically competitive firm

Accepted Answer

A) price ≠ marginal cost for all output levels. 
B) price ≠ marginal revenue for all output levels. 
C) price ≠ average revenue for all output levels. 
D) marginal revenue = marginal cost at the profit-maximizing output. 
A) price ≠ marginal cost for all output levels. 
B) price ≠ marginal revenue for all output levels. 
C) price ≠ average revenue for all output levels. 
D) marginal revenue = marginal cost at the profit-maximizing output.

Question 20

What are the most important differences between perfectly competitive markets and monopolistically competitive markets?

Accepted Answer

In both perfectly competitive and monopo

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

What is the trade-off that consumers face when buying the product of a monopolistically competitive firm?

A monopolistically competitive firm maximizes profit where

The demand curve of a monopolistically competitive firm

For a monopolistically competitive firm,marginal revenue

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

Firms in monopolistic competition compete by selling similar,but not identical products.

What is the profit-maximizing rule for a monopolistically competitive firm?

Does the fact that monopolistically competitive firms do not achieve productive efficiency or allocative efficiency mean that there is a significant loss in consumer welfare?

A monopolistically competitive firm can increase its profits beyond the long-run equilibrium break-even level by deliberately lowering its price to force some of its competitors out of the market.

One reason why the "fast-casual" restaurant market is competitive is that

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

When a credit card company offers different services with its card,like travel insurance for air travel tickets purchased with the credit card or product insurance for items purchased with the card,the credit card company is trying to

In monopolistic competition there is/are

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?

Consumers in a monopolistically competitive market do not receive any consumer surplus because the price paid for the product exceeds the marginal cost of production.

Unlike a perfectly competitive firm,for a monopolistically competitive firm

What are the most important differences between perfectly competitive markets and monopolistically competitive markets?

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

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