Question 1

A franchise is

Accepted Answer

A) a firm that buys and operates a brand name business in a new market. 
B) a firm with the legal right to sell a good or service in a particular area. 
C) a firm with no competitors. 
D) a branch of a national company. 
A) a firm that buys and operates a brand name business in a new market. 
B) a firm with the legal right to sell a good or service in a particular area. 
C) a firm with no competitors. 
D) a branch of a national company.

Question 2

The reason that the "fast-casual" restaurant market is monopolistically competitive rather than perfectly competitive is because

Accepted Answer

A) barriers to entry are very low. 
B) there are many firms in the market. 
C) products are differentiated. 
D) entry into the market is blocked. 
A) barriers to entry are very low. 
B) there are many firms in the market. 
C) products are differentiated. 
D) entry into the market is blocked.

Question 3

Figure 13-14 illustrates a monopolistically competitive firm.
-Refer to Figure 13-14.It is possible to lower the average cost of production by expanding output beyond Q0 to Q1.Why wouldn't a firm expand its output to Q1?

Accepted Answer

A) The firm wants to maximize accounting profit rather than economic profit. 
B) The firm would suffer an economic loss at Q1 while it would break even at Q0. 
C) The firm's marginal revenue would be negative at Q1. 
D) Demand is not sufficient for consumers to buy Q1. 
A) The firm wants to maximize accounting profit rather than economic profit. 
B) The firm would suffer an economic loss at Q1 while it would break even at Q0. 
C) The firm's marginal revenue would be negative at Q1. 
D) Demand is not sufficient for consumers to buy Q1.

Question 4

In monopolistic competition,if a firm produces a highly desirable product relative to its competitors,the firm will be able to raise its price without losing any customers.

Accepted Answer

A) True 
 B)False

Question 5

Buffalo Wild Wings CEO Sally Smith decided to spend more than $200 million on restaurant renovations in an attempt to attract more lunch customers and more families.Like CEOs of other monopolistically competitive firms,Smith knew that without innovating

Accepted Answer

A) her firm had no chance of remaining in business. 
B) her firm's profits would eventually be competed away by other firms. 
C) her firm would eventually earn an accounting profit of zero. 
D) her firm would become perfectly competitive. 
A) her firm had no chance of remaining in business. 
B) her firm's profits would eventually be competed away by other firms. 
C) her firm would eventually earn an accounting profit of zero. 
D) her firm would become perfectly competitive.

Question 6

Suppose a monopolistically competitive firm's output where marginal revenue equals marginal cost is 66 units and the price corresponding to this quantity is $18.If the average total cost at this output is $16.55,then its total profit is

Accepted Answer

A) $1,188. 
B) $1,092.30. 
C) $95.70. 
D) $1.45. 
A) $1,188. 
B) $1,092.30. 
C) $95.70. 
D) $1.45.

Question 7

A monopolistically competitive firm chooses

Accepted Answer

A) both the quantity of output to produce and the price at which it will sell its output. 
B) the price of the product it sells but market forces determine the quantity it will be able to sell. 
C) the quantity of output to produce but the price of the product it sells is determined collectively by all firms in the industry. 
D) the price of the product it sells but the quantity of output to produce is agreed upon by all firms in the industry. 
A) both the quantity of output to produce and the price at which it will sell its output. 
B) the price of the product it sells but market forces determine the quantity it will be able to sell. 
C) the quantity of output to produce but the price of the product it sells is determined collectively by all firms in the industry. 
D) the price of the product it sells but the quantity of output to produce is agreed upon by all firms in the industry.

Question 8

Table 13-5
 $$\begin{array} { | c | c | c | } 
\hline \text { Quantity } & \text { Price } & \text { Total Cost } \
\hline 1 & \$ 18 & \$ 14 \
\hline 2 & 16 & 20 \
\hline 3 & 14 & 26 \
\hline 4 & 12 & 32 \
\hline 5 & 10 & 38 \
\hline 6 & 8 & 44 \
\hline
\end{array}$$ Table 13-5 shows the demand and cost data facing a monopolistically competitive producer of canvas bags.
-Refer to Table 13-5.At the profit-maximizing or loss-minimizing output level

Accepted Answer

A) the firm makes a profit of $12. 
B) the firm incurs a loss equal to its fixed cost. 
C) the firm makes a profit of $16. 
D) the firm incurs a loss of $14. 
A) the firm makes a profit of $12. 
B) the firm incurs a loss equal to its fixed cost. 
C) the firm makes a profit of $16. 
D) the firm incurs a loss of $14.

Question 9

Suppose Alexander is successful in establishing a profitable market for his vegan bakery in what is a monopolistically competitive industry.In the long run,Alexander will most likely find it ________ to remain profitable as he faces ________ competition in the vegan bakery market.

Accepted Answer

A) harder;more 
B) harder;less 
C) easier;more 
D) easier;less 
A) harder;more 
B) harder;less 
C) easier;more 
D) easier;less

Question 10

Which of the following would not occur as a result of a monopolistically competitive firm suffering a short-run economic loss?

Accepted Answer

A) The firm could exit the industry in the long run. 
B) If the firm does not exit the industry in the long run its demand curve will shift to the left. 
C) If the firm does not exit the industry in the long run its demand curve will shift to the right. 
D) If the firm remains in the industry in the long run it will break even. 
A) The firm could exit the industry in the long run. 
B) If the firm does not exit the industry in the long run its demand curve will shift to the left. 
C) If the firm does not exit the industry in the long run its demand curve will shift to the right. 
D) If the firm remains in the industry in the long run it will break even.

Question 11

Figure 13-17  
-Refer to Figure 13-17.What is the productively efficient output for the firm represented in the diagram?

Accepted Answer

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

Question 12

There are many cattle ranchers in the world,and there are also many McDonald's restaurants in the world.Why,then,does a McDonald's restaurant face a downward-sloping demand curve while a cattle rancher faces a horizontal demand curve?

Accepted Answer

All cattle ranchers are selling identica

Question 13

When a monopolistically competitive firm cuts its price to increase its sales,it experiences a loss in revenue due to the

Accepted Answer

A) substitution effect. 
B) income effect. 
C) price effect. 
D) output effect. 
A) substitution effect. 
B) income effect. 
C) price effect. 
D) output effect.

Question 14

Figure 13-11  
-Refer to Figure 13-11.What is the allocatively efficient output for the firm represented in the diagram?

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 15

The most important of the factors that make a firm successful and that can be controlled by the firm's owners and managers are

Accepted Answer

A) the establishment of trademarks for its products and the aggressive defense of those trademarks. 
B) lobbying government to erect or enforce entry barriers in its markets and the marketing of its products as widely as possible. 
C) the differentiation of its products and the production of products at a lower average cost than competing firms. 
D) the selection of the prices of its products and the selection of the most productive and loyal employees. 
A) the establishment of trademarks for its products and the aggressive defense of those trademarks. 
B) lobbying government to erect or enforce entry barriers in its markets and the marketing of its products as widely as possible. 
C) the differentiation of its products and the production of products at a lower average cost than competing firms. 
D) the selection of the prices of its products and the selection of the most productive and loyal employees.

Question 16

A trademark is

Accepted Answer

A) a legal instrument which grants a firm the right to differentiate its product. 
B) a legal right to position a firm's product in high-traffic public areas such as airports and post offices. 
C) a patent on a firm's product. 
D) a distinguishing attribute such as a sign or logo that allows a firm to uniquely identify its product. 
A) a legal instrument which grants a firm the right to differentiate its product. 
B) a legal right to position a firm's product in high-traffic public areas such as airports and post offices. 
C) a patent on a firm's product. 
D) a distinguishing attribute such as a sign or logo that allows a firm to uniquely identify its product.

Question 17

Figure 13-6  
-Refer to Figure 13-6.Suppose Dell finds the relationship between the average total cost of producing notebook computers and the quantity of notebook computers produced is as shown by Figure 13-2.Dell will maximize profits if it produces ________ notebook computers per month.

Accepted Answer

A) 100,000 
B) 200,000 
C) 300,000 
D) Not enough information is given to determine the profit-maximizing quantity. 
A) 100,000 
B) 200,000 
C) 300,000 
D) Not enough information is given to determine the profit-maximizing quantity.

Question 18

Figure 13-9  
-Refer to Figure 13-9.Which of the graphs in the figure depicts a monopolistically competitive firm that is minimizing its losses?

Accepted Answer

A) Panel A 
B) Panel B 
C) Panel C 
D) Panel A and Panel C 
A) Panel A 
B) Panel B 
C) Panel C 
D) Panel A and Panel C

Question 19

If a firm can produce a product at a lower average cost than its competitors,it stands a better chance of earning economic profit.

Accepted Answer

A) True 
 B)False

Question 20

Monopolistic competition is a market structure in which

Accepted Answer

A) firms produce and sell products for which there are no close substitutes. 
B) the demand curve for a typical firm is horizontal. 
C) firms cannot influence the market price. 
D) barriers to entry are low. 
A) firms produce and sell products for which there are no close substitutes. 
B) the demand curve for a typical firm is horizontal. 
C) firms cannot influence the market price. 
D) barriers to entry are low.

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

A franchise is

The reason that the "fast-casual" restaurant market is monopolistically competitive rather than perfectly competitive is because

Figure 13-14 illustrates a monopolistically competitive firm. -Refer to Figure 13-14.It is possible to lower the average cost of production by expanding output beyond Q0 to Q1.Why wouldn't a firm expand its output to Q1?

In monopolistic competition,if a firm produces a highly desirable product relative to its competitors,the firm will be able to raise its price without losing any customers.

Buffalo Wild Wings CEO Sally Smith decided to spend more than $200 million on restaurant renovations in an attempt to attract more lunch customers and more families.Like CEOs of other monopolistically competitive firms,Smith knew that without innovating

Suppose a monopolistically competitive firm's output where marginal revenue equals marginal cost is 66 units and the price corresponding to this quantity is $18.If the average total cost at this output is $16.55,then its total profit is

A monopolistically competitive firm chooses

Table 13-5 Quantity Price Total Cost 1 \ 18 \ 14 2 16 20 3 14 26 4 12 32 5 10 38 6 8 44 Table 13-5 shows the demand and cost data facing a monopolistically competitive producer of canvas bags. -Refer to Table 13-5.At the profit-maximizing or loss-minimizing output level

Suppose Alexander is successful in establishing a profitable market for his vegan bakery in what is a monopolistically competitive industry.In the long run,Alexander will most likely find it ________ to remain profitable as he faces ________ competition in the vegan bakery market.

Which of the following would not occur as a result of a monopolistically competitive firm suffering a short-run economic loss?

Figure 13-17 -Refer to Figure 13-17.What is the productively efficient output for the firm represented in the diagram?

There are many cattle ranchers in the world,and there are also many McDonald's restaurants in the world.Why,then,does a McDonald's restaurant face a downward-sloping demand curve while a cattle rancher faces a horizontal demand curve?

When a monopolistically competitive firm cuts its price to increase its sales,it experiences a loss in revenue due to the

Figure 13-11 -Refer to Figure 13-11.What is the allocatively efficient output for the firm represented in the diagram?

The most important of the factors that make a firm successful and that can be controlled by the firm's owners and managers are

A trademark is

Figure 13-6 -Refer to Figure 13-6.Suppose Dell finds the relationship between the average total cost of producing notebook computers and the quantity of notebook computers produced is as shown by Figure 13-2.Dell will maximize profits if it produces ________ notebook computers per month.

Figure 13-9 -Refer to Figure 13-9.Which of the graphs in the figure depicts a monopolistically competitive firm that is minimizing its losses?

If a firm can produce a product at a lower average cost than its competitors,it stands a better chance of earning economic profit.

Monopolistic competition is a market structure in which

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

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Inflation, unemployment, and Federal Reserve Policy

Macroeconomics in an Open Economy

The International Financial System

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Suppose Alexander is successful in establishing a profitable market for his vegan bakery in what is a monopolistically competitive industry.In the long run,Alexander will most likely find it to remain profitable as he faces competition in the vegan bakery market.