Question 1

Excess capacity is a characteristic of monopolistically competitive firms. What does excess capacity mean?

Accepted Answer

A)  It means that firms do not produce the output level that corresponds to the minimum point on their average total cost curves. 
B)  It means that firms hire more than the minimum number of workers needed to produce the profit-maximising level of output. 
C)  It means that firms produce with inefficient combinations of resources. 
D)  It means that firms build plants that are not large enough to achieve minimum efficient scale.

Question 2

Which of the following is true for a firm with a downward-sloping demand curve for its product?

Accepted Answer

A)  Price, average revenue, and marginal revenue are all equal. 
B)  Price, average revenue, and marginal revenue are all different. 
C)  Price equals average revenue but is greater than marginal revenue. 
D)  Price equals average revenue but is less than marginal revenue.

Question 3

-Refer to Figure 10-10. to answer the following questions.
a. What is the profit-maximising output level?
b. What is the profit-maximising price?
c. At the profit-maximising output level, how much profit will be realised?
d. Does this graph most likely represent the long run or the short run? Why?

Accepted Answer

The answer of 
-Refer to Figure 10-10. to answer the...

Question 4

For a monopolistically competitive firm, price equals average revenue.

Accepted Answer

A) True 
 B)False

Question 5

A monopolistically competitive firm that is profitable in the short run will face competition that will eventually eliminate the firm's profits in the long run. But the firm can stave off competition and continue to earn economic profits if

Accepted Answer

A)  it can successfully sue its competitors for copyright infringement. 
B)  it can move to another country where there is less competition. 
C)  it can lobby the government to establish a price floor for its product. 
D)  it can find new ways to differentiate its product.

Question 6

If a firm can produce a product at a lower average cost than its competitors, it stands a better chance of earning economic profit.

Accepted Answer

A) True 
 B)False

Question 7

Which of the following is not a characteristic of monopolistic competition?

Accepted Answer

A)  There are many buyers and sellers. 
B)  There are low barriers to entry. 
C)  Average revenue is equal to price. 
D)  The products sold by all firms are identical.

Question 8

How would a marketing campaign directed at single women improve the chances of success at a place like a cigar bar?

Accepted Answer

The answer of How would a marketing campaign directed at...

Question 9

-Refer to Figure 10-9. Which of the graphs in the figure depicts a monopolistically competitive firm that is minimising its losses?

Accepted Answer

A)  Panel A 
B)  Panel B 
C)  Panel C 
D)  Panel A and Panel C

Question 10

If buyers of a monopolistically competitive product feel the products of different sellers are strongly differentiated, then the demand for each seller's product is

Accepted Answer

A)  perfectly inelastic. 
B)  perfectly elastic. 
C)  relatively inelastic. 
D)  relatively elastic.

Question 11

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 12

What are the key factors that determine the profitability of a firm in a monopolistically competitive market?

Accepted Answer

The answer of What are the key factors that determine...

Question 13

If marginal revenue is negative, then the revenue lost from receiving a lower price on all the units that could have been sold at the original price is smaller than the additional revenue from selling one more unit of the good.

Accepted Answer

A) True 
 B)False

Question 14

-Refer to Figure 10-3. What is the marginal revenue of the sixth unit of output?

Accepted Answer

A)  $4 
B)  $5 
C)  $9 
D)  $54

Question 15

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 16

-Refer to Figure 10-18. Which of the following statements is true?

Accepted Answer

A)  Da represents the long-run demand curve facing a monopolistic competitor in a constant-cost industry while Db depicts the demand curve in the short run. 
B)  Da represents the long-run demand curve facing a monopolistic competitor in a constant-cost industry while Db depicts the long-run demand curve in an increasing-cost industry. 
C)  Da represents the long-run demand curve facing a perfect competitor while Db depicts the long-run demand curve facing a monopolistic competitor. 
D)  Da represents the long-run supply curve in a perfectly competitive, constant-cost industry while Db depicts the long-run demand curve facing a monopolistic competitor in a decreasing-cost industry.

Question 17

Explain the significance of brand management to a firm that has differentiated its product. Comment specifically on the importance of obtaining a trademark.

Accepted Answer

The answer of Explain the significance of brand management to...

Question 18

In the long run, if the demand curve of a monopolistically competitive firm is tangent to its average total cost curve, then

Accepted Answer

A)  the firm would break even. 
B)  the firm would shut down temporarily. 
C)  the firm would earn enough revenue to cover its variable costs, but not its fixed costs. 
D)  the firm would earn an economic profit.

Question 19

-Refer to Figure 10-14. Economies of scale are exhausted at which output level?

Accepted Answer

A)  Q1 units 
B)  Q2 units 
C)  Q3 units 
D)  more than Q1 units

Question 20

Every firm that has the ability to affect the price of the good or service it sells will

Accepted Answer

A)  have a perfectly elastic demand curve. 
B)  have a marginal revenue curve that lies below its demand curve. 
C)  earn a short-run profit but break even in the long run. 
D)  shut down in the short run.

Exam 10: Monopolistic Competition : The Competitive Model in More Realistic Setting

Excess capacity is a characteristic of monopolistically competitive firms. What does excess capacity mean?

Which of the following is true for a firm with a downward-sloping demand curve for its product?

-Refer to Figure 10-10. to answer the following questions. a. What is the profit-maximising output level? b. What is the profit-maximising price? c. At the profit-maximising output level, how much profit will be realised? d. Does this graph most likely represent the long run or the short run? Why?

For a monopolistically competitive firm, price equals average revenue.

A monopolistically competitive firm that is profitable in the short run will face competition that will eventually eliminate the firm's profits in the long run. But the firm can stave off competition and continue to earn economic profits if

If a firm can produce a product at a lower average cost than its competitors, it stands a better chance of earning economic profit.

Which of the following is not a characteristic of monopolistic competition?

How would a marketing campaign directed at single women improve the chances of success at a place like a cigar bar?

-Refer to Figure 10-9. Which of the graphs in the figure depicts a monopolistically competitive firm that is minimising its losses?

If buyers of a monopolistically competitive product feel the products of different sellers are strongly differentiated, then the demand for each seller's product is

The demand curve of a monopolistically competitive firm

What are the key factors that determine the profitability of a firm in a monopolistically competitive market?

If marginal revenue is negative, then the revenue lost from receiving a lower price on all the units that could have been sold at the original price is smaller than the additional revenue from selling one more unit of the good.

-Refer to Figure 10-3. What is the marginal revenue of the sixth unit of output?

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.

-Refer to Figure 10-18. Which of the following statements is true?

Explain the significance of brand management to a firm that has differentiated its product. Comment specifically on the importance of obtaining a trademark.

In the long run, if the demand curve of a monopolistically competitive firm is tangent to its average total cost curve, then

-Refer to Figure 10-14. Economies of scale are exhausted at which output level?

Every firm that has the ability to affect the price of the good or service it sells will