Question 1

In long-run equilibrium,a firm in monopolistic competition makes

Accepted Answer

A)  an economic profit but the economic profit is less than it would be if the firm was a monopoly. 
B)  an economic profit that is higher than what it would be if the firm was a monopoly. 
C)  zero economic profit. 
D)  an economic profit that is the same amount as it would be if the firm was a monopoly. 
E)  an economic profit, an economic loss, or zero economic profit. 
A)  an economic profit but the economic profit is less than it would be if the firm was a monopoly. 
B)  an economic profit that is higher than what it would be if the firm was a monopoly. 
C)  zero economic profit. 
D)  an economic profit that is the same amount as it would be if the firm was a monopoly. 
E)  an economic profit, an economic loss, or zero economic profit. C

Question 2

Firms in which of the following industries can make an economic profit in the long run?

Accepted Answer

A)  both monopolistic competition and monopoly 
B)  perfect competition 
C)  monopoly 
D)  monopolistic competition 
E)  monopolistic competition and perfect competition 
A)  both monopolistic competition and monopoly 
B)  perfect competition 
C)  monopoly 
D)  monopolistic competition 
E)  monopolistic competition and perfect competition C

Question 3

Excess capacity is the

Accepted Answer

A)  difference between a perfectly competitive firm's and a monopolistically competitive firm's output. 
B)  difference between a perfectly competitive firm's and a monopoly's output. 
C)  output at the maximum point of the ATC curve. 
D)  difference between the price charged by a monopoly and a monopolistically competitive firm with the same costs. 
E)  None of the above answers is correct. 
A)  difference between a perfectly competitive firm's and a monopolistically competitive firm's output. 
B)  difference between a perfectly competitive firm's and a monopoly's output. 
C)  output at the maximum point of the ATC curve. 
D)  difference between the price charged by a monopoly and a monopolistically competitive firm with the same costs. 
E)  None of the above answers is correct. E

Question 4

In the long run,a firm in monopolistic competition ________ excess capacity and a firm in perfect competition ________ excess capacity.

Accepted Answer

A)  has; has 
B)  has; does not have 
C)  does not have; has 
D)  does not have; does not have 
E)  might have; might have 
A)  has; has 
B)  has; does not have 
C)  does not have; has 
D)  does not have; does not have 
E)  might have; might have

Question 5

In the long run in monopolistic competition,firms

Accepted Answer

A)  can make an economic profit. 
B)  incur an economic loss. 
C)  make zero economic profit. 
D)  shut down if they are making zero economic profit. 
E)  make either an economic profit or zero economic profit. 
A)  can make an economic profit. 
B)  incur an economic loss. 
C)  make zero economic profit. 
D)  shut down if they are making zero economic profit. 
E)  make either an economic profit or zero economic profit.

Question 6

In the long run,a firm in monopolistic competition

Accepted Answer

A)  makes zero economic profit. 
B)  produces at a minimum average total cost. 
C)  has deficient capacity. 
D)  can make either a normal profit or an economic profit. 
E)  produces a quantity where its demand curve is upward sloping. 
A)  makes zero economic profit. 
B)  produces at a minimum average total cost. 
C)  has deficient capacity. 
D)  can make either a normal profit or an economic profit. 
E)  produces a quantity where its demand curve is upward sloping.

Question 7

-The table above shows the revenue figures for the top four firms along with a total for the remaining firms in the fast-food industry.What is the four-firm concentration ratio for the industry?

Accepted Answer

A)  200 
B)  20 percent 
C)  25 percent 
D)  80 percent 
E)  100 percent 
A)  200 
B)  20 percent 
C)  25 percent 
D)  80 percent 
E)  100 percent

Question 8

If a firm is maximizing its profit and producing less than the output at which its average total cost is minimized,then that firm

Accepted Answer

A)  must be suffering an economic loss. 
B)  must be earning an economic profit. 
C)  has excess capacity. 
D)  is producing at its capacity output. 
E)  must be earning a normal profit. 
A)  must be suffering an economic loss. 
B)  must be earning an economic profit. 
C)  has excess capacity. 
D)  is producing at its capacity output. 
E)  must be earning a normal profit.

Question 9

If a firm has excess capacity,it

Accepted Answer

A)  produces less than its efficient scale. 
B)  should advertise to maximize profits. 
C)  should decrease its markup to increase its profit. 
D)  is a perfectly competitive firm. 
E)  must face a horizontal demand curve. 
A)  produces less than its efficient scale. 
B)  should advertise to maximize profits. 
C)  should decrease its markup to increase its profit. 
D)  is a perfectly competitive firm. 
E)  must face a horizontal demand curve.

Question 10

Draw an example of a firm in monopolistic competition that is earning an economic profit.Be sure to label all the curves.Indicate the area that equals the firm's economic profit.

Accepted Answer

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Question 11

In the long run,firms in monopolistic competition make zero economic profit because

Accepted Answer

A)  firms are free to enter and exit. 
B)  their products are similar but slightly different. 
C)  of over-reliance on product marketing. 
D)  of collusion among the various sellers. 
E)  their demand curves are horizontal. 
A)  firms are free to enter and exit. 
B)  their products are similar but slightly different. 
C)  of over-reliance on product marketing. 
D)  of collusion among the various sellers. 
E)  their demand curves are horizontal.

Question 12

How do advertising and other selling costs affect a firm?

Accepted Answer

A)  They shift the marginal cost curve upward. 
B)  The only effect is that the excess capacity is reduced. 
C)  The only effect is that the demand for the product increases. 
D)  They shift the average total cost curve upward. 
E)  They do not change demand and shift the average total cost curve downward. 
A)  They shift the marginal cost curve upward. 
B)  The only effect is that the excess capacity is reduced. 
C)  The only effect is that the demand for the product increases. 
D)  They shift the average total cost curve upward. 
E)  They do not change demand and shift the average total cost curve downward.

Question 13

In monopolistic competition,there are ________ barriers to entry and so firms in monopolistic competition ________ make an economic profit in the long run.

Accepted Answer

A)  high; can 
B)  high; cannot 
C)  no; can 
D)  no; cannot 
E)  sometimes; can sometimes 
A)  high; can 
B)  high; cannot 
C)  no; can 
D)  no; cannot 
E)  sometimes; can sometimes

Question 14

In monopolistic competition,profit is maximized by producing so that marginal revenue

Accepted Answer

A)  equals price. 
B)  is negative. 
C)  equals marginal cost and which are less than price. 
D)  equals average total cost but not marginal cost. 
E)  equals marginal cost and equals price. 
A)  equals price. 
B)  is negative. 
C)  equals marginal cost and which are less than price. 
D)  equals average total cost but not marginal cost. 
E)  equals marginal cost and equals price.

Question 15

One reason a company advertises is to

Accepted Answer

A)  signal consumers that its product is high quality. 
B)  lower its total cost. 
C)  produce more efficiently. 
D)  lower its variable costs. 
E)  lower its fixed costs. 
A)  signal consumers that its product is high quality. 
B)  lower its total cost. 
C)  produce more efficiently. 
D)  lower its variable costs. 
E)  lower its fixed costs.

Question 16

The larger the four-firm concentration ratio,the ________ competition within an industry; the larger the Herfindahl-Hirschman Index,the ________ competition within an industry.

Accepted Answer

A)  more; more 
B)  more; less 
C)  less; more 
D)  less; less 
E)  The premise of the question is wrong because the four-firm concentration ratio applies only to markets with four firms in it and these markets are, by definition, not competitive. 
A)  more; more 
B)  more; less 
C)  less; more 
D)  less; less 
E)  The premise of the question is wrong because the four-firm concentration ratio applies only to markets with four firms in it and these markets are, by definition, not competitive.

Question 17

One characteristic of monopolistic competition is that it has

Accepted Answer

A)  many firms producing a slightly differentiated product. 
B)  many firms producing identical goods. 
C)  one firm producing a unique good. 
D)  a few firms producing a slightly differentiated product. 
E)  large barriers to entry. 
A)  many firms producing a slightly differentiated product. 
B)  many firms producing identical goods. 
C)  one firm producing a unique good. 
D)  a few firms producing a slightly differentiated product. 
E)  large barriers to entry.

Question 18

Which of the following is NOT a characteristic of long-run equilibrium in monopolistic competition?

Accepted Answer

A)  The firm makes zero economic profit. 
B)  Price is equal to average total cost. 
C)  Production occurs at minimum average total cost. 
D)  Marginal revenue is equal to marginal cost. 
E)  Price exceeds marginal revenue. 
A)  The firm makes zero economic profit. 
B)  Price is equal to average total cost. 
C)  Production occurs at minimum average total cost. 
D)  Marginal revenue is equal to marginal cost. 
E)  Price exceeds marginal revenue.

Question 19

What does monopolistic competition have in common with monopoly?

Accepted Answer

A)  a large number of firms 
B)  a downward-sloping demand curve 
C)  the ability to collude with respect to price 
D)  mutual interdependence 
E)  barriers to entry 
A)  a large number of firms 
B)  a downward-sloping demand curve 
C)  the ability to collude with respect to price 
D)  mutual interdependence 
E)  barriers to entry

Question 20

Which of the following statements about a firm in long-run equilibrium is true?

Accepted Answer

A) P > MC for a firm in monopolistic competition, and P = ATC for a firm in perfect competition B) MR > P for a firm in monopolistic competition, and P = ATC for a firm in perfect competition C) P = MC for firms in both monopolistic competition and perfect competition D) P = MC for a firm in perfect competition, and P < ATC for a firm in monopolistic competition E) Both answers A and B are correct. A) P > MC for a firm in monopolistic competition, and P = ATC for a firm in perfect competition B) MR > P for a firm in monopolistic competition, and P = ATC for a firm in perfect competition C) P = MC for firms in both monopolistic competition and perfect competition D) P = MC for a firm in perfect competition, and P < ATC for a firm in monopolistic competition E) Both answers A and B are correct.

In long-run equilibrium,a firm in monopolistic competition makes

Firms in which of the following industries can make an economic profit in the long run?

Excess capacity is the

In the long run,a firm in monopolistic competition excess capacity and a firm in perfect competition excess capacity.

In the long run in monopolistic competition,firms

In the long run,a firm in monopolistic competition

-The table above shows the revenue figures for the top four firms along with a total for the remaining firms in the fast-food industry.What is the four-firm concentration ratio for the industry?

If a firm is maximizing its profit and producing less than the output at which its average total cost is minimized,then that firm

If a firm has excess capacity,it

Draw an example of a firm in monopolistic competition that is earning an economic profit.Be sure to label all the curves.Indicate the area that equals the firm's economic profit.

In the long run,firms in monopolistic competition make zero economic profit because

How do advertising and other selling costs affect a firm?

In monopolistic competition,there are barriers to entry and so firms in monopolistic competition make an economic profit in the long run.

In monopolistic competition,profit is maximized by producing so that marginal revenue

One reason a company advertises is to

The larger the four-firm concentration ratio,the competition within an industry; the larger the Herfindahl-Hirschman Index,the competition within an industry.

One characteristic of monopolistic competition is that it has

Which of the following is NOT a characteristic of long-run equilibrium in monopolistic competition?

What does monopolistic competition have in common with monopoly?

Which of the following statements about a firm in long-run equilibrium is true?

Getting Started

The U.S.and Global Economies

The Economic Problem

Demand and Supply

Elasticities of Demand and Supply

Efficiency and Fairness of Markets

Government Actions in Markets

Taxes

Global Markets in Action

Externalities

Public Goods and Common Resources

Markets with Private Information

Consumer Choice and Demand

Production and Cost

Perfect Competition

Monopoly

Oligopoly

Markets for Factors of Production

Economic Inequality

Filters

Exam 17: Monopolistic Competition

In long-run equilibrium,a firm in monopolistic competition makes

Firms in which of the following industries can make an economic profit in the long run?

Excess capacity is the

In the long run,a firm in monopolistic competition ________ excess capacity and a firm in perfect competition ________ excess capacity.

In the long run in monopolistic competition,firms

In the long run,a firm in monopolistic competition

-The table above shows the revenue figures for the top four firms along with a total for the remaining firms in the fast-food industry.What is the four-firm concentration ratio for the industry?

If a firm is maximizing its profit and producing less than the output at which its average total cost is minimized,then that firm

If a firm has excess capacity,it

Draw an example of a firm in monopolistic competition that is earning an economic profit.Be sure to label all the curves.Indicate the area that equals the firm's economic profit.

In the long run,firms in monopolistic competition make zero economic profit because

How do advertising and other selling costs affect a firm?

In monopolistic competition,there are ________ barriers to entry and so firms in monopolistic competition ________ make an economic profit in the long run.

In monopolistic competition,profit is maximized by producing so that marginal revenue

One reason a company advertises is to

The larger the four-firm concentration ratio,the ________ competition within an industry; the larger the Herfindahl-Hirschman Index,the ________ competition within an industry.

One characteristic of monopolistic competition is that it has

Which of the following is NOT a characteristic of long-run equilibrium in monopolistic competition?

What does monopolistic competition have in common with monopoly?

Which of the following statements about a firm in long-run equilibrium is true?

Getting Started

The U.S.and Global Economies

The Economic Problem

Demand and Supply

Elasticities of Demand and Supply

Efficiency and Fairness of Markets

Government Actions in Markets

Taxes

Global Markets in Action

Externalities

Public Goods and Common Resources

Markets with Private Information

Consumer Choice and Demand

Production and Cost

Perfect Competition

Monopoly

Oligopoly

Markets for Factors of Production

Economic Inequality

Filters

In the long run,a firm in monopolistic competition excess capacity and a firm in perfect competition excess capacity.

In monopolistic competition,there are barriers to entry and so firms in monopolistic competition make an economic profit in the long run.

The larger the four-firm concentration ratio,the competition within an industry; the larger the Herfindahl-Hirschman Index,the competition within an industry.