Question 1

In the long run,what happens to the demand curve facing a monopolistically competitive firm that is earning short-run profits?

Accepted Answer

A) The demand curve will shift to the left and became more elastic. 
B) The demand curve will shift to the left and became less elastic. 
C) The demand curve will shift to the right and became more elastic. 
D) The demand curve will shift to the right and became less elastic.

Question 2

Which of the following statements is true about advertising by a monopolistically competitive firm?

Accepted Answer

A) Since the monopolistic competitor,like the perfect competitor,makes zero profit in the long run,it is a waste of resources to advertise its products. 
B) Advertising could make the monopolistic competitor's demand more inelastic,but advertising has no effect on a perfect competitor's demand. 
C) Advertising will be more beneficial if a monopolistic competitor colludes with other firms to advertise the products of the industry as a whole rather than an individual firm's product. 
D) Monopolistically competitive firms tend to shun advertising because advertising draws attention to the variety of differentiated products available in the industry.

Question 3

Nike has used Michael Jordan to create the impression that Air Jordan basketball shoes are superior to any other basketball shoes.Nike is attempting to

Accepted Answer

A) differentiate Air Jordan basketball shoes from other types of basketball shoes. 
B) lower the marginal cost of producing Air Jordan basketball shoes. 
C) increase its profit by raising the price of Air Jordan basketball shoes. 
D) convince consumers that Air Jordan basketball shoes are no different from other basketball shoes favored by celebrities.

Question 4

$$\begin{array} { | c | c | c | c | c | c | c | } 
\hline \begin{array} { c } 
\text { Quantity } \
\text { Sold }
\end{array} & \text { Price } & \begin{array} { c } 
\text { Total } \
\text { Revenue }
\end{array} & \begin{array} { c } 
\text { Marginal } \
\text { Revenue }
\end{array} & \begin{array} { c } 
\text { Total } \
\text { Cost }
\end{array} & \begin{array} { c } 
\text { Marginal } \
\text { Cost }
\end{array} & \text { Profit } \
\hline 0 & \$ 10 & \$ 0 & - - - - & \$ 2 & - - - - & - \$ 2 \
\hline 1 & 9 & 9 & & 8 & & \
\hline 2 & 8 & 16 & & 13 & & \
\hline 3 & 7 & 21 & & 17 & & \
\hline 4 & 6 & 24 & & 20 & & \
\hline 5 & 5 & 25 & & 22 & & \
\hline 6 & 4 & 24 & & 26 & & \
\hline
\end{array}$$ Table 13-4 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 13-4.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 5

Table 13-1
 $$\begin{array} { | c | c | c | } 
\hline \text { Quantity } & \begin{array} { c } 
\text { Price } \
\text { (dollars) }
\end{array} & \begin{array} { c } 
\text { Total Revenue } \
\text { (dollars) }
\end{array} \
\hline 1 & \$ 7.50 & \$ 7.50 \
\hline 2 & 7.00 & 14.00 \
\hline 3 & 6.50 & 19.50 \
\hline 4 & 6.00 & 24.00 \
\hline 5 & 5.50 & 27.50 \
\hline 6 & 5.00 & 30.00 \
\hline
\end{array}$$
-Refer to Table 13-1.What portion of the marginal revenue of the 5th unit is due to the output effect and what portion is due to the price effect?

Accepted Answer

A) output effect = $3.00;price effect = $0.50 
B) output effect = $1.50;price effect = $2.00 
C) output effect = $5.50;price effect = -$2.00 
D) output effect = $4.00;price effect = -$0.50

Question 6

Advertising is the action of a firm that is intended to maintain the differentiation of its product over time.

Accepted Answer

A) True 
 B)False

Question 7

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 8

If a firm faces a downward-sloping demand curve

Accepted Answer

A) the demand for its product must be inelastic. 
B) it can control both price and quantity sold. 
C) it must reduce its price to sell more units. 
D) it will always make a profit.

Question 9

One goal a firm tries to achieve when it advertises a product is to

Accepted Answer

A) make the demand curve for the product more elastic. 
B) shift the demand curve for the product to the left. 
C) make the demand curve for the product unitary elastic. 
D) make the demand curve for the product more inelastic.

Question 10

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

Accepted Answer

A) Firms are price takers. 
B) There are many buyers and sellers. 
C) Barriers to entry are low. 
D) Firms sell similar,but not identical,products.

Question 11

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 12

Which of the following is an example of a factor that a firm's owners and managers can control in making the firm successful?

Accepted Answer

A) the ability to produce the product at a lower cost 
B) changing consumer tastes 
C) a rise in the price of a key input,for example,a rise in the price of oil leads to higher energy costs 
D) the number of competitors in the market

Question 13

Which of the following characteristics is common to monopolistic competition and perfect competition?

Accepted Answer

A) Firms produce identical products. 
B) Entry barriers into the industry are low. 
C) Each firm faces a downward-sloping demand curve. 
D) Firms take market prices as given.

Question 14

The ability to engage in product differentiation is one of the factors a manager or owner of a firm can control in order to create value for consumers.

Accepted Answer

A) True 
 B)False

Question 15

If a monopolistically competitive firm has excess capacity

Accepted Answer

A) it has exhausted all economies of scale. 
B) it is producing beyond the minimum efficient scale. 
C) it is experiencing diseconomies of scale. 
D) it produces a level of output that places it on the negatively sloped portion of its average total cost curve.

Question 16

Which of the following is true of trademarks?

Accepted Answer

A) A successful trademark is one that becomes a generic name for a product,for example,"Xerox" has become a generic term for making photocopies. 
B) A successful trademark is one that allows consumers to immediately identify the source or producer of the product. 
C) If a firm is granted a trademark,then no other firms can legally produce similar products for a given period of time. 
D) If a firm is granted a trademark,then no other firms can legally sell in the same geographic area for a given period of time.

Question 17

Why are many companies concerned about brand management?

Accepted Answer

The answer of Why are many companies concerned about brand...

Question 18

Table 13-1
 $$\begin{array} { | c | c | c | } 
\hline \text { Quantity } & \begin{array} { c } 
\text { Price } \
\text { (dollars) }
\end{array} & \begin{array} { c } 
\text { Total Revenue } \
\text { (dollars) }
\end{array} \
\hline 1 & \$ 7.50 & \$ 7.50 \
\hline 2 & 7.00 & 14.00 \
\hline 3 & 6.50 & 19.50 \
\hline 4 & 6.00 & 24.00 \
\hline 5 & 5.50 & 27.50 \
\hline 6 & 5.00 & 30.00 \
\hline
\end{array}$$
-Refer to Table 13-1.What portion of the marginal revenue of the 4th unit is due to the output effect and what portion is due to the price effect?

Accepted Answer

A) output effect = $24.00;price effect = $19.50 
B) output effect = $6.50;price effect = $2.00 
C) output effect = -$0.50;price effect = $5.00 
D) output effect = $6.00;price effect = -$1.50

Question 19

Figure 13-17 
-Refer to Figure 13-17.What is the allocatively efficient output for the firm represented in the diagram?

Accepted Answer

A) Qf units 
B) Qg units 
C) Qh units 
D) Qj units

Question 20

Figure 13-8 shows cost and demand curves for a monopolistically competitive producer of iced tea.
-Refer to Figure 13-8.What is the profit-maximizing output level?

Accepted Answer

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

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