Question 1

Explain the similarities and differences between the long-run equilibrium for a perfectly competitive firm and a monopolistically competitive firm.Illustrate your answer with a graph demonstrating the long run equilibrium for the two types of firms.

Accepted Answer

The answer of Explain the similarities and differences between the...

Question 2

Table 13-1
  Table 13-1 lists estimated revenues and costs (per week)for plastic vials (100 vials per box)for the Victoria Biological Supplies Company.Victoria sells plastic vials to university and private research laboratories.
-Refer to Table 13-1.Victoria's profit-maximizing quantity sold (Q)and price (P)are:

Accepted Answer

A) Q = 3; P = $7. 
B) Q = 4; P = $6. 
C) Q = 5; P = $5. 
D) Q = 6; P = $4.

Question 3

Table 13-2
  Table 13-2 shows the demand and cost data facing a monopolistically competitive producer of canvas bags.
-Refer to Table 13-2.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 4

When a monopolistically competitive firm lowers it price one bad thing happens to the firm.What is this "one bad thing" called?

Accepted Answer

A) the output effect 
B) the income effect 
C) the substitution effect 
D) the price effect

Question 5

Figure 13-5 
-Refer to Figure 13-5.Which of the graphs in the figure depicts a monopolistically competitive firm that is minimizing its losses?

Accepted Answer

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

Question 6

Figure 13-4  Figure 13-4 shows cost and demand curves for a monopolistically competitive producer of iced-tea.
-Refer to Figure 13-4.What is the profit-maximizing output level?

Accepted Answer

A) 22 cases 
B) 24 cases 
C) 30 cases 
D) 38 cases

Question 7

Figure 13-3  Figure 13-3 shows short-run cost and demand curves for a monopolistically competitive firm in the footwear market.
-Refer to Figure 13-3.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 8

Which of the following would not occur as a result of a monopolistically competitive firm suffering a short-run economic loss?

Accepted Answer

A) The firm could exit the industry in the long run. 
B) If the firm does not exit the industry in the long run its demand curve will shift to the left. 
C) If the firm does not exit the industry in the long run its demand curve will shift to the right. 
D) If the firm remains in the industry in the long run it will break even.

Question 9

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 10

The economic analysis of monopolistic competition shows that market forces eliminate profits in the long run.However,it is possible for a firm to continue to earn economic profits if the firm

Accepted Answer

A) expands its marketing budget. 
B) adopts new technologies that enable it to lower its cost of production. 
C) expands its product offerings to appeal to a wider range of consumers. 
D) reduces its price to expand its market.

Question 11

If firms in a monopolistically competitive industry are making profits in the short run,

Accepted Answer

A) barriers to entry will be erected to keep out rivals. 
B) some firms will ultimately exit the industry. 
C) they will resort to advertising wars to help sustain these profits. 
D) new firms will enter the market.

Question 12

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 13

A monopolistically competitive firm should lower its price if its marginal revenue exceeds its marginal cost.

Accepted Answer

A) True 
 B)False

Question 14

Why are demand and marginal revenue represented by the same curve for a firm in a perfectly competitive market,but by separate curves for a firm in a monopolistically competitive market?

Accepted Answer

The answer of Why are demand and marginal revenue represented...

Question 15

Firms in monopolistic competition compete by selling similar,but not identical products.

Accepted Answer

A) True 
 B)False

Question 16

Figure 13-5 
-Refer to Figure 13-5.Which of the graphs in the figure depicts a monopolistically competitive firm that is earning economic profits?

Accepted Answer

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

Question 17

In the United States,the average person mostly patronizes firms that operate in

Accepted Answer

A) perfectly competitive markets. 
B) monopolistically competitive markets. 
C) oligopoly markets. 
D) monopoly markets.

Question 18

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 19

What is the trade-off that consumers face when buying the product of a monopolistically competitive firm?

Accepted Answer

A) Consumers pay higher prices but receive better quality goods compared to the output of perfectly competitive firms. 
B) Consumers pay a price greater than marginal cost,but have the luxury of choices more suited to their tastes. 
C) Consumers pay higher prices but the products are produced by highly efficient firms. 
D) Consumers pay lower prices but have fewer choices.

Question 20

If some monopolistically competitive firms exit their market after suffering short-run losses,the demand curves of remaining firms will shift to the right.

Accepted Answer

A) True 
 B)False

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

Explain the similarities and differences between the long-run equilibrium for a perfectly competitive firm and a monopolistically competitive firm.Illustrate your answer with a graph demonstrating the long run equilibrium for the two types of firms.

Table 13-2 Table 13-2 shows the demand and cost data facing a monopolistically competitive producer of canvas bags. -Refer to Table 13-2.At the profit-maximizing or loss-minimizing output level

When a monopolistically competitive firm lowers it price one bad thing happens to the firm.What is this "one bad thing" called?

Figure 13-5 -Refer to Figure 13-5.Which of the graphs in the figure depicts a monopolistically competitive firm that is minimizing its losses?

Figure 13-4 Figure 13-4 shows cost and demand curves for a monopolistically competitive producer of iced-tea. -Refer to Figure 13-4.What is the profit-maximizing output level?

Figure 13-3 Figure 13-3 shows short-run cost and demand curves for a monopolistically competitive firm in the footwear market. -Refer to Figure 13-3.Which of the following is the area that represents the profit or loss experienced by the firm?

Which of the following would not occur as a result of a monopolistically competitive firm suffering a short-run economic loss?

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

The economic analysis of monopolistic competition shows that market forces eliminate profits in the long run.However,it is possible for a firm to continue to earn economic profits if the firm

If firms in a monopolistically competitive industry are making profits in the short run,

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

A monopolistically competitive firm should lower its price if its marginal revenue exceeds its marginal cost.

Why are demand and marginal revenue represented by the same curve for a firm in a perfectly competitive market,but by separate curves for a firm in a monopolistically competitive market?

Firms in monopolistic competition compete by selling similar,but not identical products.

Figure 13-5 -Refer to Figure 13-5.Which of the graphs in the figure depicts a monopolistically competitive firm that is earning economic profits?

In the United States,the average person mostly patronizes firms that operate in

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?

What is the trade-off that consumers face when buying the product of a monopolistically competitive firm?

If some monopolistically competitive firms exit their market after suffering short-run losses,the demand curves of remaining firms will shift to the right.