Question 1

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 2

When a monopolistically competitive firm cuts its price to increase its sales,it experiences a loss in revenue due to the income effect and a gain in revenue due to the substitution effect.

Accepted Answer

A) True 
 B)False

Question 3

________ describes the actions a firm takes to maintain the differentiation of its product over time.

Accepted Answer

A) Product differentiation 
B) Brand management 
C) Aggressive marketing 
D) Advertising 
A) Product differentiation 
B) Brand management 
C) Aggressive marketing 
D) Advertising

Question 4

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

Accepted Answer

A) True 
 B)False

Question 5

Figure 13-18  
-Refer to Figure 13-18.Which of the following statements is true?

Accepted Answer

A) Da represents the long-run demand curve facing a monopolistic competitor in a constant-cost industry while Db depicts the demand curve in the short run. 
B) Da represents the long-run demand curve facing a monopolistic competitor in a constant-cost industry while Db depicts the long-run demand curve in an increasing-cost industry. 
C) Da represents the long-run demand curve facing a perfect competitor while Db depicts the long-run demand curve facing a monopolistic competitor. 
D) Da represents the long-run supply curve in a perfectly competitive,constant-cost industry while Db depicts the long-run demand curve facing a monopolistic competitor in a decreasing-cost industry. 
A) Da represents the long-run demand curve facing a monopolistic competitor in a constant-cost industry while Db depicts the demand curve in the short run. 
B) Da represents the long-run demand curve facing a monopolistic competitor in a constant-cost industry while Db depicts the long-run demand curve in an increasing-cost industry. 
C) Da represents the long-run demand curve facing a perfect competitor while Db depicts the long-run demand curve facing a monopolistic competitor. 
D) Da represents the long-run supply curve in a perfectly competitive,constant-cost industry while Db depicts the long-run demand curve facing a monopolistic competitor in a decreasing-cost industry.

Question 6

After selling 1,000 three-ring binders Tony DiFulvio realizes that the marginal revenue from selling the last binder was less than the marginal cost.From this we can conclude that

Accepted Answer

A) Tony's business earns a short-run economic profit. 
B) Tony should shut down his business temporarily. 
C) Tony's profit fell after selling his 1,000th three-ring binder. 
D) Tony's profit would be greater if he sold an additional three-ring binder. 
A) Tony's business earns a short-run economic profit. 
B) Tony should shut down his business temporarily. 
C) Tony's profit fell after selling his 1,000th three-ring binder. 
D) Tony's profit would be greater if he sold an additional three-ring binder.

Question 7

Assume that price exceeds average variable cost over the relevant range of demand.If a monopolistically competitive firm is producing at an output where marginal revenue is $111.11 and marginal cost is $118,then to maximize profits the firm should increase its output.

Accepted Answer

A) True 
 B)False

Question 8

Figure 13-19  
-Refer to Figure 13-19 to answer the following questions.
a.What is the productively efficient output?
b.What is the allocatively efficient output?
c.What is the amount of excess capacity?
d.Suppose the firm is currently producing 14 units.What happens if it increases output to 17 units?

Accepted Answer

a.The productively efficient output is 2

Question 9

When a firm faces a downward-sloping demand curve,marginal revenue

Accepted Answer

A) must exceed price because the price effect outweighs the output effect. 
B) is less than price because a firm must lower its price to sell more. 
C) equals price because the firm sells a standardized product. 
D) must exceed price because the output effect outweighs the price effect. 
A) must exceed price because the price effect outweighs the output effect. 
B) is less than price because a firm must lower its price to sell more. 
C) equals price because the firm sells a standardized product. 
D) must exceed price because the output effect outweighs the price effect.

Question 10

Figure 13-13  
-Refer to Figure 13-13.If the diagram represents a typical firm in the market,what is likely to happen to its average cost of production in the long run?

Accepted Answer

A) It will probably fall since the firm must be cost efficient to remain competitive. 
B) It will probably fall since the firm will be selling less than its current amount. 
C) It will probably rise since the firm will be producing less than its current amount. 
D) It will probably rise since its long-run demand is likely to be higher. 
A) It will probably fall since the firm must be cost efficient to remain competitive. 
B) It will probably fall since the firm will be selling less than its current amount. 
C) It will probably rise since the firm will be producing less than its current amount. 
D) It will probably rise since its long-run demand is likely to be higher.

Question 11

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 12

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.If the firm represented in the diagram is currently producing and selling Qa units,what is the price charged?

Accepted Answer

A) P0 
B) P1 
C) P2 
D) P3 
A) P0 
B) P1 
C) P2 
D) P3

Question 13

What are the key factors that determine the profitability of a firm in a monopolistically competitive market?

Accepted Answer

A monopolistically competitive firm's pr

Question 14

A firm that successfully differentiates its product or lowers its average cost of production creates

Accepted Answer

A) value for its customers. 
B) entry barriers into its market. 
C) a perfectly inelastic demand curve for its product. 
D) economies of scale. 
A) value for its customers. 
B) entry barriers into its market. 
C) a perfectly inelastic demand curve for its product. 
D) economies of scale.

Question 15

$$\begin{array} { | c | c | c | c | c | } 
\hline \text { Quantity } & \begin{array} { c } 
\text { Price } \
\text { (dollars) }
\end{array} & \begin{array} { c } 
\text { Total Revenue } \
\text { (dollars) }
\end{array} & \begin{array} { c } 
\text { Total Variable } \
\text { Cost (dollars) }
\end{array} & \begin{array} { c } 
\text { Total Cost } \
\text { (dollars) }
\end{array} \
\hline 0 & \$ 21 & \$ 0 & \$ 0 & \$ 50 \
\hline 1 & 20 & 20 & 16 & 66 \
\hline 2 & 19 & 38 & 31 & 81 \
\hline 3 & 18 & 54 & 45 & 95 \
\hline 4 & 17 & 68 & 59 & 109 \
\hline 5 & 16 & 80 & 75 & 125 \
\hline 6 & 15 & 90 & 93 & 143 \
\hline 7 & 14 & 98 & 112 & 162 \
\hline 8 & 13 & 104 & 140 & 190 \
\hline 9 & 12 & 108 & 180 & 230 \
\hline 10 & 11 & 110 & 230 & 280 \
\hline
\end{array}$$ Table 13-3 shows the demand and cost schedules for a monopolistically competitive firm.
-Refer to Table 13-3.What is its average variable cost of production at its optimal output level?

Accepted Answer

A) $0 (because its optimal output = 0) 
B) $15 
C) $14.75 
D) $29 
A) $0 (because its optimal output = 0) 
B) $15 
C) $14.75 
D) $29

Question 16

Central Grocery in New Orleans is famous for its muffaletta,a large round sandwich filled with deli meats and topped with a tangy olive salad.Suppose the following table represents cost and revenue data for Central Grocery.Fill in the columns for TR,MR,MC,ATC,and profit.If Central Grocery wants to maximize profits,what price should it charge for a muffaletta,what quantity should it sell,and what will be the amount of its total profit?
 \(\begin{array}{|c|c|c|c|c|c|c|c|}
\hline \begin{array}{c}
\text { Muffalettas } \
\text { Sold per } \
\text { Day }
\end{array} & \begin{array}{c}
\text { Price } \
(\boldsymbol{P})
\end{array} & \begin{array}{c}
\text { Total } \
\text { Revenue } \
(\boldsymbol{T R})
\end{array} & \begin{array}{c}
\text { Marginal } \
\text { Revenue } \
(\boldsymbol{M R})
\end{array} & \begin{array}{c}
\text { Total } \
\text { Cost } \
(\boldsymbol{T} \boldsymbol{C})
\end{array} & \begin{array}{c}
\text { Average } \
\text { Marginal } \
\text { Cost }(\boldsymbol{M C})
\end{array} & \begin{array}{c}
\text { Total Cost } \
(\boldsymbol{A} \boldsymbol{T} \boldsymbol{C})
\end{array} & \text { Profit } \
\hline 0 & \$ 15 & & & \$ 12 & & & \
\hline 1 & 14 & & & 18 & & & \
\hline 2 & 13 & & & 20 & & & \
\hline 3 & 12 & & & 21 & & & \
\hline 4 & 11 & & & 23 & & & \
\hline 5 & 10 & & & 26 & & & \
\hline 6 & 9 & & & 30 & & & \
\hline 7 & 8 & & & 35 & & & \
\hline 8 & 7 & & & 42 & & & \
\hline 9 & 6 & & & 52 & & & \
\hline 10 & 5 & & & 78 & & & \
\hline
\end{array}\)

Accepted Answer

To maximize profits,Central Gr

Question 17

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

Accepted Answer

A) firms produce at the minimum point of their average cost curves. 
B) price equals marginal cost. 
C) firms break even. 
D) price equals marginal revenue. 
A) firms produce at the minimum point of their average cost curves. 
B) price equals marginal cost. 
C) firms break even. 
D) price equals marginal revenue.

Question 18

A monopolistically competitive firm that earns an accounting profit in the short run

Accepted Answer

A) must also earn an economic profit in the short run. 
B) does not earn enough to earn an economic profit in the short run. 
C) could earn an economic profit,break even,or suffer an economic loss in the short run. 
D) could earn an economic profit or break even,but could not suffer an economic loss in the short run. 
A) must also earn an economic profit in the short run. 
B) does not earn enough to earn an economic profit in the short run. 
C) could earn an economic profit,break even,or suffer an economic loss in the short run. 
D) could earn an economic profit or break even,but could not suffer an economic loss in the short run.

Question 19

Figure 13-13  
-Refer to Figure 13-13.If the diagram represents a typical firm in the market,what is likely to happen in the long run?

Accepted Answer

A) Some firms will exit the market causing the demand to increase for firms remaining in the market. 
B) New firms will enter the market causing the demand to decrease for existing firms. 
C) Inefficient firms will exit the market and new cost-efficient firms will enter the market. 
D) Competition will be intensified as firms strive to make long-run profits. 
A) Some firms will exit the market causing the demand to increase for firms remaining in the market. 
B) New firms will enter the market causing the demand to decrease for existing firms. 
C) Inefficient firms will exit the market and new cost-efficient firms will enter the market. 
D) Competition will be intensified as firms strive to make long-run profits.

Question 20

How might a monopolistically competitive firm continually earn economic profit greater than zero?

Accepted Answer

A monopolistically competitive

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

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

When a monopolistically competitive firm cuts its price to increase its sales,it experiences a loss in revenue due to the income effect and a gain in revenue due to the substitution effect.

________ describes the actions a firm takes to maintain the differentiation of its product over time.

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

Figure 13-18 -Refer to Figure 13-18.Which of the following statements is true?

After selling 1,000 three-ring binders Tony DiFulvio realizes that the marginal revenue from selling the last binder was less than the marginal cost.From this we can conclude that

Assume that price exceeds average variable cost over the relevant range of demand.If a monopolistically competitive firm is producing at an output where marginal revenue is $111.11 and marginal cost is $118,then to maximize profits the firm should increase its output.

When a firm faces a downward-sloping demand curve,marginal revenue

Figure 13-13 -Refer to Figure 13-13.If the diagram represents a typical firm in the market,what is likely to happen to its average cost of production in the long run?

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

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.If the firm represented in the diagram is currently producing and selling Qa units,what is the price charged?

What are the key factors that determine the profitability of a firm in a monopolistically competitive market?

A firm that successfully differentiates its product or lowers its average cost of production creates

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

A monopolistically competitive firm that earns an accounting profit in the short run

Figure 13-13 -Refer to Figure 13-13.If the diagram represents a typical firm in the market,what is likely to happen in the long run?

How might a monopolistically competitive firm continually earn economic profit greater than zero?

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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