Deck 14: Monopolistic Competition and Price Discrimination

Question 1

_____ is a market structure in which many firms sell similar but differentiated products.

A) A monopoly
B) An oligopoly
C) A monopolistic competition
D) A perfect competition

Answer 1

C

Question 2

_____ is the real or perceived distinction between products that are close substitutes.

A) Product differentiation
B) Customer preference
C) Product attraction
D) Customer consideration

Answer 2

A

Question 3

In monopolistic competition, products are not:

A) differentiated.
B) perfect substitutes.
C) facing highly inelastic demand.
D) produced by many firms.

Answer 3

B

Question 4

In perfect competition, products are _____, but in monopolistic competition, products are:

A) differentiated; perfect substitutes.
B) perfect substitutes; price inelastic.
C) price inelastic; differentiated.
D) perfect substitutes; differentiated.

Question 5

Oliver owns Oliver's Landscaping Company and faces competition from Barney's Yard Company and other landscaping firms. Oliver specializes in installing landscapes in the yards of newly constructed homes. Barney's firm specializes in lawn maintenance for established yards. Oliver and Barney are most likely competing in _____ market structure.

A) a perfect competition
B) a monopolistic competition
C) an oligopoly
D) a monopoly

Question 6

_____ occurs when businesses try to distinguish their products from rivals without changing price.

A) Price competition
B) Change in demand
C) Non-price competition
D) Competitive demand

Question 7

A firm that has been able to establish a strong brand loyalty has differentiated itself by using:

A) service.
B) product design.
C) perception.
D) location.

Question 8

When variations in style, flavor, color, and other features are used by a firm, the firm is employing _____ to differentiate its products.

A) service
B) product quality and design
C) perception
D) location

Question 9

There are many sellers in monopolistic competitive markets due to:

A) inelastic demand.
B) inelastic supply.
C) high entry barriers.
D) low entry barriers.

Question 10

Demand is less price elastic in monopolistic competition than in perfect competition due to:

A) product standardization.
B) product differentiation.
C) high entry barriers.
D) long-run economic profits.

Question 11

In monopolistic competition, low barriers to entry:

A) lead to product standardization.
B) lead to product differentiation.
C) prevent long-run economic profits.
D) allow for long-run economic profits.

Question 12

In _____, profits from differentiated products attract entry by new firms, which puts downward pressure on subsequent profits and prices.

A) perfect competition
B) monopolistic competition
C) an oligopoly
D) a monopoly

Question 13

_____ is an example of monopolistic competition market.

A) Wheat
B) An electric company
C) A large passenger jet manufacturing company
D) A restaurant

Question 14

Unlike a monopoly, firms in monopolistic competition are faced with:

A) intense competition.
B) standardized products.
C) high barriers to entry.
D) inelastic price elasticity of demand.

Question 15

Unlike firms in perfect competition, firms in monopolistic competition have:

A) intense competition.
B) standardized products.
C) high barriers to entry.
D) some price-setting ability.

Question 16

Unlike firms that are in perfect competition, firms in monopolistic competition have:

A) intense competition.
B) differentiated products.
C) high barriers to entry.
D) no price-setting ability.

Question 17

Due to _____, the demand curve for a monopolistic competitive firm is downward sloping.

A) intense competition
B) differentiated products
C) high barriers to entry
D) no price-setting ability

Question 18

The monopolistic competitive firm faces a highly price _____ demand curve but not _____ demand curve as in perfect competition.

A) inelastic; an elastic
B) elastic; a perfectly elastic
C) elastic; an inelastic
D) inelastic; a perfectly elastic

Question 19

The monopolistic competitive firm's demand curve is more _____ than a monopoly and _____ than a firm in a perfectly competitive market.

A) elastic; more elastic
B) inelastic; less elastic
C) elastic; less elastic
D) inelastic; more elastic

Question 20

The marginal revenue curve for the monopolistic competitive firm:

A) lies above the demand curve.
B) is the same as the demand curve.
C) lies below the demand curve.
D) does not apply in this market structure.

Question 21

If a firm that is operating in a monopolistic competitive market wishes to sell more units, it must:

A) lower its price.
B) raise its price.
C) lower its costs.
D) raise its costs.

Question 22

(Figure: Profit Maximization in Monopolistic Competition 0) In the figure, the profit-maximizing price is:

A) $5.
B) $8.
C) $10.
D) $12.

Question 23

(Figure: Profit Maximization in Monopolistic Competition 0) In the figure, the profit-maximizing quantity is:

A) 8.
B) 10.
C) 15.
D) 18.

Question 24

(Figure: Profit Maximization in Monopolistic Competition 0) In the figure, the profit-maximizing price is _____, and the quantity is:

A) $5; 8.
B) $8; 15.
C) $10; 18.
D) $12; 10.

Question 25

(Figure: Profit Maximization in Monopolistic Competition 0) In the figure, this monopolistic competitive firm can expect profit to _____ as competition:

A) decrease; increases.
B) increase; increases.
C) decrease; decreases.
D) increase; stabilizes.

Question 26

(Figure: Profit Maximization in Monopolistic Competition 0) In the figure, this monopolistic competitive firm is experiencing an economic _____ per unit sold.

A) loss of $7
B) profit of $7
C) loss of $4
D) profit of $4

Question 27

(Figure: Profit Maximization in Monopolistic Competition 0) In the figure, this monopolistic competitive firm can expect its _____ curve to shift _____ as competition enters the market.

A) average total cost (ATC); downward
B) demand (D); left
C) marginal return (MR); right
D) demand (D); right

Question 28

(Figure: Profit Maximization in Monopolistic Competition A) In the figure, the profit-maximizing price is:

A) $11.
B) $15.
C) $18.
D) $24.

Question 29

(Figure: Profit Maximization in Monopolistic Competition A) In the figure, the profit-maximizing quantity is:

A) 0.
B) 6.
C) 9.
D) 10.

Question 30

(Figure: Profit Maximization in Monopolistic Competition A) In the figure, the profit-maximizing price is _____, and the quantity is:

A) $11; 6.
B) $15; 9.
C) $18; 10.
D) $24; 6.

Question 31

(Figure: Profit Maximization in Monopolistic Competition A) In the figure, this monopolistic competitive firm can expect profit to _____ as competition:

A) decrease; increases.
B) increase; decreases.
C) stabilize; stabilizes.
D) increase; stabilizes.

Question 32

(Figure: Profit Maximization in Monopolistic Competition A) In the figure, this monopolistic competitive firm is experiencing an economic _____ per unit sold.

A) profit of $0
B) profit of $13
C) loss of $78
D) profit of $78

Question 33

(Figure: Profit Maximization in Monopolistic Competition A) In the figure, the firm:

A) is operating with productive efficiency.
B) is operating at the minimum average total cost.
C) has excess capacity.
D) observes allocative efficiency.

Question 34

(Figure: Profit Maximization in Monopolistic Competition A) In the figure, the firm:

A) is operating with productive efficiency.
B) is operating at the long run equilibrium.
C) will likely see the industry expand.
D) will likely see the industry shrink.

Question 35

(Figure: Profit Maximization in Monopolistic Competition A) In the figure, allocative efficiency is not realized. Which of these BEST explains why?

A) ATC is not minimized.
B) P > ATC
C) P > MC
D) MR = MC

Question 36

(Figure: Profit Maximization in Monopolistic Competition A) In the figure, productive efficiency is not realized. Which of these BEST explains why?

A) ATC is not minimized.
B) P > ATC
C) P > MC
D) MR = MC

Question 37

In a monopolistic competition market, _____ is the amount by which output would need to increase in order to minimize average total cost.

A) economic efficiency
B) excess capacity
C) productive efficiency
D) allocative capacity

Question 38

If a firm expands by increasing output, it will:

A) increase average total cost.
B) decrease fixed cost.
C) increase fixed cost.
D) decrease average total cost.

Question 39

Monopolistic competition _____ lead to _____ efficiency.

A) does; price and demand
B) does not; price and demand
C) does; productive and allocative
D) does not; productive and allocative

Question 40

In monopolistic competition, production costs and price are higher than in perfect competition generally due to:

A) standardized products.
B) product differentiation.
C) productive efficiency.
D) allocative efficiency.

Question 41

When consumers desire _____, production costs and price are generally higher than in perfect competition.

A) standardized products
B) product differentiation
C) productive efficiency
D) allocative efficiency

Question 42

_____ is all of the activities that businesses use to sell products.

A) Economics
B) Digital media
C) Marketing
D) Demand

Question 43

The marketing four Ps are product, placement, price, and:

A) progress.
B) presentation.
C) promotion.
D) prestige.

Question 44

The marketing four Ps are _____, placement, price, and promotion.

A) product
B) presentation
C) progress
D) prestige

Question 45

The marketing four Ps are product, _____, price, and promotion.

A) prestige
B) presentation
C) progress
D) placement

Question 46

The marketing four Ps are product, placement, _____, and promotion.

A) prestige
B) presentation
C) progress
D) price

Question 47

The _____ the collection of decisions that are involved in marketing products.

A) marketing mix is
B) advertising mix
C) digital media campaign is
D) social media campaign is

Question 48

_____ refers to the paid activities that businesses use to sell products.

A) Advertising
B) The concept of the four Ps
C) Public relations
D) Channel organization

Question 49

Amanda wants to open a flower shop and is trying to decide whether to open it in the downtown area or in the suburbs. Amanda is addressing the _____ component of the 4Ps.

A) product
B) price
C) placement
D) promotion

Question 50

Barbara wants to open a flower shop across the street from Amanda's Flower Shop. She is deciding whether she should price her flowers the same or lower than Amanda's. Barbara is addressing the _____ component of the 4Ps.

A) product
B) price
C) placement
D) promotion

Question 51

Clarice owns a flower shop. The wholesale price that she pays for her roses has recently increased. She is unsure whether she should pass the cost increase on to her customers or accept the decrease in profit on roses. Clarice is addressing the _____ component of the 4Ps.

A) product
B) price
C) placement
D) promotion

Question 52

Diedre wants to build awareness and sales for her flower shop. She is considering whether to begin a social media campaign primarily on Facebook and Instagram. Diedre is utilizing the _____ component of the 4Ps.

A) product
B) price
C) placement
D) promotion

Question 53

The only element of the 4Ps that directly provides revenue to the seller is:

A) product.
B) price.
C) placement.
D) promotion.

Question 54

All components of the 4Ps are expenses to the seller EXCEPT for:

A) product.
B) price.
C) placement.
D) promotion.

Question 55

The primary purpose of advertising is to increase:

A) supply.
B) expansion.
C) inventory.
D) demand.

Question 56

Some economists believe that advertising is detrimental to consumers because it may:

A) provide useful information.
B) bring awareness to new products.
C) manipulate them into making unwise decisions.
D) increase competition.

Question 57

Advertising takes place primarily in monopolistic competition and _____ market structures.

A) perfect competition
B) oligopoly
C) monopoly
D) technology-based

Question 58

Advertising primarily takes place in oligopoly and _____ market structures.

A) perfect competition
B) monopolistic competition
C) monopoly
D) technology-based

Question 59

When firms advertise, the demand curve generally:

A) is not affected.
B) shifts to the left.
C) experiences movement along the curve.
D) shifts to the right.

Question 60

Advertising _____ the price elasticity of demand for a firm's product.

A) does not affect
B) increases
C) negatively affects
D) decreases

Question 61

Advertising lowers price elasticity of demand for a firm's product because it:

A) is an expense.
B) increases a firm's costs.
C) builds brand loyalty.
D) reduces demand.

Question 62

As a result of advertising, a firm may be able to:

A) charge a higher price.
B) charge a lower price.
C) lower costs.
D) reduce demand.

Question 63

A firm's products may become less price elastic as advertising:

A) increases brand loyalty.
B) decreases costs.
C) increases supply.
D) decreases price.

Question 64

Ineffective advertising may result in _____ costs and _____ profits.

A) higher; higher
B) lower; higher
C) higher; lower
D) lower; lower

Question 65

Effective advertising may decrease a firm's average total costs if:

A) product differentiation is achieved.
B) competitors go out of business.
C) economies of scale are realized.
D) supply decreases.

Question 66

Marketing may increase a firm's pricing power if:

A) customer loyalty increases.
B) competitors go out of business.
C) economies of scale are realized.
D) price elasticity increases.

Question 67

When a celebrity promotes a product, this may:

A) force competitors out of business.
B) send a signal of high quality to consumers.
C) decrease average total cost.
D) increase price elasticity.

Question 68

Brand names are least common in:

A) perfect competition.
B) monopolistic competition.
C) an oligopoly.
D) a monopoly.

Question 69

Noah has seen costs rise at his pricey coffee shop. As owner of the coffee shop, he is considering switching to lower-cost coffee beans. In the long run, the coffee shop's brand may be destroyed because his:

A) prices would be too low.
B) price elasticity of demand would decrease.
C) brand would no longer be a signal of high quality.
D) competitors would leave the market.

Question 70

In a perfectly competitive market, individual firms rarely advertise because:

A) it is too costly.
B) it is impossible to build brand loyalty.
C) they do not compete on price.
D) products are standardized.

Question 71

When advertising occurs in a perfectly competitive market, it is generally promoting the:

A) individual firm.
B) industry as a whole.
C) firms that are subsidized by the government.
D) firm's owner.

Question 72

_____ is the business strategy of maximizing profit by selling essentially the same product at different prices to different consumers.

A) Product differentiation
B) Price discrimination
C) Product standardization
D) Discount pricing

Question 73

Liam owns a sandwich shop. He is using price discrimination to maximize profits when he:

A) charges less for his sandwiches than his competitors do.
B) charges more for his sandwiches than his competitors do.
C) provides sandwiches for free to employees.
D) gives members of the military a 10% discount.

Question 74

When firms practice price discrimination, they are always:

A) lowering average total cost.
B) increasing average total cost.
C) segmenting the market.
D) outsmarting their competitors.

Question 75

When movie theaters charge a lower rate for senior citizens, they may do so because senior citizens:

A) have a higher price elasticity of demand.
B) like to go to the movies.
C) buy more popcorn.
D) agree to sit near the aisles.

Question 76

Price discrimination can occur in all market structures EXCEPT for:

A) perfect competition.
B) monopolistic competition.
C) oligopoly.
D) monopoly.

Question 77

To be able to price-discriminate, a firm must be able to:

A) erect high barriers to entry.
B) charge a high price.
C) switch from a monopoly to a perfect competition market.
D) prevent resale of the good or service.

Question 78

To be able to price-discriminate, a firm must be able to:

A) erect high barriers to entry.
B) differentiate buyers.
C) switch from a monopoly to a perfect competition market.
D) charge a high price.

Question 79

To be able to price discriminate, a firm must:

A) be a monopoly.
B) have some price-setting ability.
C) be in a perfectly competitive market structure.
D) charge everyone the same price.

Question 80

_____ is the process of buying a good in a single market and immediately selling it at a higher price in another market with little to no risk.

A) Price discrimination
B) Monopoly power
C) Market segmentation
D) Arbitrage