Question 1

Marketing refers to all the activities necessary for a firm to sell a product to a consumer.

Accepted Answer

A) True 
 B)False

Question 2

Figure 13-11  
-Refer to Figure 13-11.The firm represented in the diagram

Accepted Answer

A) makes zero economic profit. 
B) makes zero accounting profit. 
C) should exit the industry. 
D) should expand its output to take advantage of economies of scale. 
A) makes zero economic profit. 
B) makes zero accounting profit. 
C) should exit the industry. 
D) should expand its output to take advantage of economies of scale.

Question 3

If a firm has excess capacity,it means

Accepted Answer

A) that the firm expends too much of its resources on advertising its product without seeing an appreciable increase in sales. 
B) that the firm is not producing its minimum efficient scale of output. 
C) that the firm's long-run average cost of producing a given quantity exceeds its short-run cost of producing that same quantity. 
D) that the firm's quantity supplied exceeds its quantity demanded. 
A) that the firm expends too much of its resources on advertising its product without seeing an appreciable increase in sales. 
B) that the firm is not producing its minimum efficient scale of output. 
C) that the firm's long-run average cost of producing a given quantity exceeds its short-run cost of producing that same quantity. 
D) that the firm's quantity supplied exceeds its quantity demanded.

Question 4

In the long run,if price is less than average cost

Accepted Answer

A) there is an incentive for firms to exit the market. 
B) there is profit incentive for firms to enter the market. 
C) the market must be in long-run equilibrium. 
D) there is no incentive for the number of firms in the market to change. 
A) there is an incentive for firms to exit the market. 
B) there is profit incentive for firms to enter the market. 
C) the market must be in long-run equilibrium. 
D) there is no incentive for the number of firms in the market to change.

Question 5

Assuming that the total market size remains constant,a monopolistically competitive firm earning profits in the short run will find the demand for its product decreasing in the long run because

Accepted Answer

A) new entrants into the market are more likely to have cutting edge products. 
B) as the firm raises its price in the long run,it will lose some customers to new entrants in the market. 
C) some of its customers have switched to purchasing the products of new entrants in the market. 
D) its costs of production rises. 
A) new entrants into the market are more likely to have cutting edge products. 
B) as the firm raises its price in the long run,it will lose some customers to new entrants in the market. 
C) some of its customers have switched to purchasing the products of new entrants in the market. 
D) its costs of production rises.

Question 6

Figure 13-10 shows cost and demand curves for a monopolistically competitive producer of iced tea.
-Refer to Figure 13-10.to answer the following questions.
a.What is the profit-maximizing output level?
b.What is the profit-maximizing price?
c.At the profit-maximizing output level,how much profit will be realized?
d.Does this graph most likely represent the long run or the short run? Why?

Accepted Answer

a.The profit-maximizing output

Question 7

Why would an organization as large as the National Football League (NFL)incur large legal expenses to try to prevent bars and restaurants from using their trademarked term "Super Bowl" in their advertising?

Accepted Answer

The National Football League has spent a

Question 8

Figure 13-8 shows cost and demand curves for a monopolistically competitive producer of iced tea.
-Refer to Figure 13-8.What is the firm's profit-maximizing price?

Accepted Answer

A) $12 
B) $13 
C) $14 
D) $16 
A) $12 
B) $13 
C) $14 
D) $16

Question 9

Brand management refers to

Accepted Answer

A) picking a brand name for a new product that will attract attention. 
B) the efforts to maintain the differentiation of a product over time. 
C) efforts to reduce the cost of production. 
D) selling the right to use a brand name in a particular market. 
A) picking a brand name for a new product that will attract attention. 
B) the efforts to maintain the differentiation of a product over time. 
C) efforts to reduce the cost of production. 
D) selling the right to use a brand name in a particular market.

Question 10

Figure 13-17  
-Refer to Figure 13-17.What is the amount of excess capacity?

Accepted Answer

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

Question 11

Suppose a monopolistically competitive firm sells 25 units at a price of $10.Calculate its marginal revenue per unit of output if it sells 5 more units of output when it reduced its price to $9.

Accepted Answer

A) $270 
B) $20 
C) $4 
D) $2.50 
A) $270 
B) $20 
C) $4 
D) $2.50

Question 12

A monopolistically competitive firm that earns economic profits in the short run will be able to expand its market share even if the market size remains constant.

Accepted Answer

A) True 
 B)False

Question 13

A monopolistically competitive firm should lower its price if its marginal revenue exceeds its marginal cost.

Accepted Answer

A) True 
 B)False

Question 14

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

Accepted Answer

A) Q = 0 (firm should not produce) 
B) Q = 3;P = $18 
C) Q = 4;P = $17 
D) Q = 5;P = $16 
A) Q = 0 (firm should not produce) 
B) Q = 3;P = $18 
C) Q = 4;P = $17 
D) Q = 5;P = $16

Question 15

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

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 16

$$\begin{array} { | c | c | c | c | } 
\hline \begin{array} { c } 
\text { Quantity } \
\text { (cases) }
\end{array} & \begin{array} { c } 
\text { Price } \
\text { (dollars) }
\end{array} & \begin{array} { c } 
\text { Total Revenue } \
\text { (dollars) }
\end{array} & \begin{array} { c } 
\text { Total Cost } \
\text { (dollars) }
\end{array} \
\hline 1 & \$ 75 & \$ 75 & \$ 60 \
\hline 2 & 70 & 140 & 85 \
\hline 3 & 65 & 195 & 105 \
\hline 4 & 60 & 240 & 115 \
\hline 5 & 55 & 275 & 130 \
\hline 6 & 50 & 300 & 155 \
\hline 7 & 45 & 315 & 190 \
\hline 8 & 40 & 320 & 230 \
\hline 9 & 35 & 315 & 280 \
\hline
\end{array}$$ Eco Energy is a monopolistically competitive producer of a sports beverage called Power On.Table 13-2 shows the firm's demand and cost schedules.
-Refer to Table 13-2.What is the output (Q)that maximizes profit and what is the price (P)charged?

Accepted Answer

A) P = $55;Q = 5 cases 
B) P = $50;Q = 6 cases 
C) P = $45;Q = 7 cases 
D) P = $40;Q = 8 cases 
A) P = $55;Q = 5 cases 
B) P = $50;Q = 6 cases 
C) P = $45;Q = 7 cases 
D) P = $40;Q = 8 cases

Question 17

A monopolistically competitive firm faces a downward-sloping demand curve because

Accepted Answer

A) it is able to control price and quantity demanded. 
B) there are few substitutes for its product. 
C) of product differentiation. 
D) its market decisions are affected by the decisions of its rivals. 
A) it is able to control price and quantity demanded. 
B) there are few substitutes for its product. 
C) of product differentiation. 
D) its market decisions are affected by the decisions of its rivals.

Question 18

Suppose Jason owns a small pastry shop.Jason wants to maximize his profit,and thinking back to the microeconomics class he took in college,he decides he needs to produce a quantity of pastries which will minimize his average total cost.Will Jason's strategy necessarily maximize profits for his pastry shop?

Accepted Answer

A) Yes;Since Jason's pastry shop is in a perfectly competitive market,the only way to maximize profit is to produce the quantity where average total cost is minimized. 
B) Not necessarily;This strategy will only maximize Jason's profit in the long run,but not in the short run. 
C) No;In order to maximize profit,Jason would never want to produce the quantity where average total cost is minimized. 
D) Not necessarily;Depending on demand,Jason may maximize profit by producing a quantity other than that where average total cost is at a minimum. 
A) Yes;Since Jason's pastry shop is in a perfectly competitive market,the only way to maximize profit is to produce the quantity where average total cost is minimized. 
B) Not necessarily;This strategy will only maximize Jason's profit in the long run,but not in the short run. 
C) No;In order to maximize profit,Jason would never want to produce the quantity where average total cost is minimized. 
D) Not necessarily;Depending on demand,Jason may maximize profit by producing a quantity other than that where average total cost is at a minimum.

Question 19

In a monopolistically competitive market,a successful new restaurant

Accepted Answer

A) can earn economic profits in the long run if it uses barriers to restrict entry by new restaurants. 
B) will earn zero economic profit in the long run because of free entry,but competition will lead restaurants to offer different versions of the same product. 
C) will face high entry barriers because of health and safety regulations to which all restaurants are subject. 
D) must obtain a trademark to ensure that it will break even in the long run. 
A) can earn economic profits in the long run if it uses barriers to restrict entry by new restaurants. 
B) will earn zero economic profit in the long run because of free entry,but competition will lead restaurants to offer different versions of the same product. 
C) will face high entry barriers because of health and safety regulations to which all restaurants are subject. 
D) must obtain a trademark to ensure that it will break even in the long run.

Question 20

Table 13-1
 $$\begin{array} { | c | c | c | } 
\hline \text { Quantity } & \begin{array} { c } 
\text { Price } \
\text { (dollars) }
\end{array} & \begin{array} { c } 
\text { Total Revenue } \
\text { (dollars) }
\end{array} \
\hline 1 & \$ 7.50 & \$ 7.50 \
\hline 2 & 7.00 & 14.00 \
\hline 3 & 6.50 & 19.50 \
\hline 4 & 6.00 & 24.00 \
\hline 5 & 5.50 & 27.50 \
\hline 6 & 5.00 & 30.00 \
\hline
\end{array}$$
-Refer to Table 13-1.What is the marginal revenue of the 3rd unit?

Accepted Answer

A) $6.50 
B) $5.50 
C) $1.83 
D) $0.50 
A) $6.50 
B) $5.50 
C) $1.83 
D) $0.50

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

Marketing refers to all the activities necessary for a firm to sell a product to a consumer.

Figure 13-11 -Refer to Figure 13-11.The firm represented in the diagram

If a firm has excess capacity,it means

In the long run,if price is less than average cost

Assuming that the total market size remains constant,a monopolistically competitive firm earning profits in the short run will find the demand for its product decreasing in the long run because

Why would an organization as large as the National Football League (NFL)incur large legal expenses to try to prevent bars and restaurants from using their trademarked term "Super Bowl" in their advertising?

Figure 13-8 shows cost and demand curves for a monopolistically competitive producer of iced tea. -Refer to Figure 13-8.What is the firm's profit-maximizing price?

Brand management refers to

Figure 13-17 -Refer to Figure 13-17.What is the amount of excess capacity?

Suppose a monopolistically competitive firm sells 25 units at a price of $10.Calculate its marginal revenue per unit of output if it sells 5 more units of output when it reduced its price to $9.

A monopolistically competitive firm that earns economic profits in the short run will be able to expand its market share even if the market size remains constant.

A monopolistically competitive firm should lower its price if its marginal revenue exceeds its marginal cost.

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

A monopolistically competitive firm faces a downward-sloping demand curve because

In a monopolistically competitive market,a successful new restaurant

Table 13-1 Quantity Price (dollars) Total Revenue (dollars) 1 \ 7.50 \ 7.50 2 7.00 14.00 3 6.50 19.50 4 6.00 24.00 5 5.50 27.50 6 5.00 30.00 -Refer to Table 13-1.What is the marginal revenue of the 3rd unit?

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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