Question 1

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 2

Figure 13-13
 
-Refer to Figure 13-13.What is the output price?

Accepted Answer

A) P₄ 
B) P₃ 
C) P₂ 
D) P₁

Question 3

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.

Question 4

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.

Question 5

Table 13-5
  
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.

Question 6

Consumers benefit from monopolistic competition by

Accepted Answer

A) being able to choose from products more closely suited to their tastes. 
B) paying the lowest possible price for the product. 
C) paying the same price as everyone else. 
D) being able to purchase high-quality products at low prices.

Question 7

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 8

In the highly competitive fast-food restaurant market, brand name restaurants have a strong profit incentive to maintain high sanitary conditions and avoid any negative consequences.

Accepted Answer

A) True 
 B)False

Question 9

Both monopolistically competitive firms and perfectly competitive firms maximize profits

Accepted Answer

A) by producing where price equals average total cost. 
B) by producing where marginal revenue equals average revenue. 
C) by producing where marginal revenue equals marginal cost. 
D) by producing where price equals average variable cost.

Question 10

Monopolistically competitive firms achieve allocative efficiency but not productive efficiency.

Accepted Answer

A) True 
 B)False

Question 11

Figure 13-3
 
-Refer to Figure 13-3.The marginal revenue from one additional unit sold is the sum of the gain in revenue from selling the additional unit and the loss in revenue from having to charge a lower price to sell the additional unit.Based on the diagram in the figure,

Accepted Answer

A) X represents the gain (price effect)and Y the loss (output effect). 
B) X + Z represents the loss (output effect)and Y the gain (price effect). 
C) Y represents the gain (output effect)and X the loss (price effect). 
D) X represents the loss (price effect)and Y + Z the gain (output effect).

Question 12

The marketing of the first ballpoint pen by Milton Reynolds showed

Accepted Answer

A) that first-mover advantages can make it more difficult for new firms to enter a market and compete against the first mover. 
B) that being the first firm to market a new product can result in a natural monopoly. 
C) that being the first firm to market a product may not lead to a long-lived advantage over later entrants into the market. 
D) how important it is to receive patent protection for a new product.

Question 13

Figure 13-11
 
-Refer to Figure 13-11.What is the amount of excess capacity?

Accepted Answer

A) Q₄ - Q₃ units 
B) Q₄ - Q₂ units 
C) Q₃ - Q₂ units 
D) Q₃ - Q₁ units

Question 14

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

The answer of There are many cattle ranchers in the...

Question 15

Table 13-2
  
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 marginal profit from producing and selling the 5th case?

Accepted Answer

A) $275 
B) $145 
C) $35 
D) $20

Question 16

Table 13-1
 
-Refer to Figure 13-2.The marginal revenue from selling the additional unit Qb instead of Qₐ equals

Accepted Answer

A) the area (G + H). 
B) the area (H - 
E) . 
C) the area (E + F)- (G + H). 
D) the area G. 
E) .

Question 17

If a typical monopolistically competitive firm is making 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 18

Figure 13-18
 
-Refer to Figure 13-18.The diagram demonstrates that

Accepted Answer

A) in the short run, the monopolistic competitor produces an output Qb but in the long run after it adjusts its capacity, it will produce the allocatively efficient output, Qₐ. 
B) it is not possible for a monopolistic competitor to produce the productively efficient output level, Qₐ, because of product differentiation. 
C) it is possible for a monopolistic competitor to produce the productively efficient output level, Qₐ, if it is willing to lower its price from Pb to Pₐ. 
D) in the long run, the monopolistic competitor produces the minimum-cost output level, Qₐ, but in the short run its output of Qb is not cost minimizing.

Question 19

In San Francisco there are many restaurants that specialize in a wide variety of cuisines.Patronage at these restaurants is influenced by factors such as tastes, price, and location.This market is

Accepted Answer

A) perfectly competitive. 
B) monopolistically competitive. 
C) oligopolistic. 
D) monopolistic.

Question 20

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.

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

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.

Figure 13-13 -Refer to Figure 13-13.What is the output price?

A trademark is

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

Table 13-5 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

Consumers benefit from monopolistic competition by

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

In the highly competitive fast-food restaurant market, brand name restaurants have a strong profit incentive to maintain high sanitary conditions and avoid any negative consequences.

Both monopolistically competitive firms and perfectly competitive firms maximize profits

Monopolistically competitive firms achieve allocative efficiency but not productive efficiency.

Figure 13-3 -Refer to Figure 13-3.The marginal revenue from one additional unit sold is the sum of the gain in revenue from selling the additional unit and the loss in revenue from having to charge a lower price to sell the additional unit.Based on the diagram in the figure,

The marketing of the first ballpoint pen by Milton Reynolds showed

Figure 13-11 -Refer to Figure 13-11.What is the amount of excess capacity?

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?

Table 13-2 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 marginal profit from producing and selling the 5th case?

Table 13-1 -Refer to Figure 13-2.The marginal revenue from selling the additional unit Qb instead of Qₐ equals

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

Figure 13-18 -Refer to Figure 13-18.The diagram demonstrates that

In San Francisco there are many restaurants that specialize in a wide variety of cuisines.Patronage at these restaurants is influenced by factors such as tastes, price, and location.This market is

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