Question 1

Figure 13-6
 
-Refer to Figure 13-6.Suppose the above graph represents the relationship between the average total cost of producing notebook computers and the quantity of notebook computers produced by Dell.On a graph, illustrate the demand, MR, MC, and ATC curves which would represent Dell maximizing profits at a quantity of 100,000 per month and identify the area on the graph which represents the profit.

Accepted Answer

The answer of Figure 13-6
 
-Refer to Figure 13-6.Suppose the...

Question 2

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 3

Economists have long debated whether there is a significant loss of well-being to society in markets that are monopolistically competitive rather than perfectly competitive.Which of the following offers the best reason why some economists believe that monopolistically competitive markets are less efficient than perfectly competitive markets?

Accepted Answer

A) In contrast to perfectly competitive markets, neither allocative efficiency nor productive efficiency are achieved in monopolistically competitive markets. 
B) In contrast to perfectly competitive markets, firms in monopolistically competitive markets earn economic profits in long-run equilibrium. 
C) In contrast to perfectly competitive markets, firms in monopolistically competitive markets do not produce where price equals average total cost in long-run equilibrium. 
D) In contrast to perfectly competitive markets, firms in monopolistically competitive markets can charge a price greater than average total cost in the short run.

Question 4

Compared to a perfectly competitive firm, the demand curve facing a monopolistically competitive firm is

Accepted Answer

A) more elastic because there are many close substitutes for the product of a monopolistically competitive firm. 
B) less elastic because monopolistically competitive firms produce similar, but not identical, products. 
C) just as elastic because there are many sellers in both markets. 
D) more elastic because in the long run, the demand curve is tangent to the firm's average total cost curve.

Question 5

A monopolistically competitive firm earning profits in the short run will find the demand for its product decreasing and becoming more elastic in the long run as new firms move into the industry until

Accepted Answer

A) the original firm is driven into bankruptcy. 
B) the firm's demand curve is perfectly elastic. 
C) the firm's demand curve is tangent to its average total cost curve. 
D) the firm exits the market.

Question 6

One of your classmates asserts that advertising, marketing research, and brand management are redundant expenditures because a firm can obtain the same information by simply looking at what customers are already buying.Which of the following is not a response you might offer her?

Accepted Answer

A) Conducting market research is a good way for firms to keep abreast of changing consumer tastes and preferences. 
B) Advertising and brand management allow a firm to create an entry barrier which will insulate the firm from competition and from undertaking further product innovations. 
C) Marketing research could allow a firm to identify new market opportunities and at least, in the short run, a firm can make a profit supplying products to this market segment. 
D) If a firm successfully manages its brand, customers become less price sensitive as they perceive fewer substitutes for the firm's brand.

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 answer of Why would an organization as large as...

Question 8

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.

Question 9

Consumers in a monopolistically competitive market do not receive any consumer surplus because the price paid for the product exceeds the marginal cost of production.

Accepted Answer

A) True 
 B)False

Question 10

Complete the following table.

Accepted Answer

The answer of Complete the following table.
 ...

Question 11

The key characteristics of a monopolistically competitive market structure include

Accepted Answer

A) few sellers. 
B) sellers selling similar but differentiated products. 
C) high barriers to entry. 
D) sellers acting to maximize revenue.

Question 12

The demand curve of a monopolistically competitive firm

Accepted Answer

A) is horizontal because the firm must cut its price to sell more. 
B) is perfectly elastic. 
C) is downward-sloping because it sells an identical product. 
D) is downward-sloping because it must cut its price to sell more.

Question 13

All of the following characteristics are common to both monopolistic competition and perfect competition except

Accepted Answer

A) firms act to maximize profit. 
B) entry barriers into the industries are low. 
C) the market demand curves are downward-sloping. 
D) firms take market prices as given.

Question 14

Figure 13-15
 
-Refer to Figure 13-15 to answer the following questions.
a.What is the profit-maximizing output level?
b.What is the profit-maximizing price?
c.What is the average total cost at the profit-maximizing output level?
d.What area represents the firm's profit?
e.At which output level are economies of scale exhausted?
f.Does this graph most likely represent the long run or the short run? Why?

Accepted Answer

The answer of Figure 13-15
 
-Refer to Figure 13-15 to...

Question 15

Figure 13-7
  
Figure 13-7 shows short-run cost and demand curves for a monopolistically competitive firm in the footwear market.
-Refer to Figure 13-7.Which of the following is the area that represents the profit or loss experienced by the firm?

Accepted Answer

A) a loss represented by the rectangle P₂uvP₁ 
B) a loss represented by the rectangle P₂uwP₀ 
C) a loss represented by the rectangle P₁vwP₀ 
D) an accounting profit equal to P₁vwP₀

Question 16

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

Question 17

Monopolistically competitive firms can differentiate their products

Accepted Answer

A) by producing at minimum efficient scale. 
B) by producing where marginal revenue equals marginal cost. 
C) by equating price and average total cost. 
D) through marketing.

Question 18

Why do most firms in monopolistic competition typically make zero profit in the long run?

Accepted Answer

A) because firms produce differentiated products 
B) because the lack of entry barriers would compete away profits 
C) because firms do not produce at their minimum efficient scale 
D) because the total market is not large enough to accommodate so many firms

Question 19

If a typical monopolistically competitive firm is incurring short-run losses, then

Accepted Answer

A) other more competitive firms will enter the market. 
B) as some firms leave, the remaining firms will experience an increase in the demand for their products. 
C) as some firms leave, the demand for the products of the remaining firms will become more elastic. 
D) the industry will eventually cease to exist.

Question 20

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

Exam 13: Monopolistic Competition: the Competitive Model in a

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.

Compared to a perfectly competitive firm, the demand curve facing a monopolistically competitive firm is

A monopolistically competitive firm earning profits in the short run will find the demand for its product decreasing and becoming more elastic in the long run as new firms move into the industry until

One of your classmates asserts that advertising, marketing research, and brand management are redundant expenditures because a firm can obtain the same information by simply looking at what customers are already buying.Which of the following is not a response you might offer her?

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?

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

Consumers in a monopolistically competitive market do not receive any consumer surplus because the price paid for the product exceeds the marginal cost of production.

Complete the following table.

The key characteristics of a monopolistically competitive market structure include

The demand curve of a monopolistically competitive firm

All of the following characteristics are common to both monopolistic competition and perfect competition except

Figure 13-7 Figure 13-7 shows short-run cost and demand curves for a monopolistically competitive firm in the footwear market. -Refer to Figure 13-7.Which of the following is the area that represents the profit or loss experienced by the firm?

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.

Monopolistically competitive firms can differentiate their products

Why do most firms in monopolistic competition typically make zero profit in the long run?

If a typical monopolistically competitive firm is incurring short-run losses, then

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.