Question 1

In the short-run,the similarity between a monopolist and a monopolistically competitive firm is that

Accepted Answer

A)  they both make the same decisions about the level of output and output price.
B)  they both face an upward-sloping supply curve for their products.
C)  they both try to maximize their total revenues.
D)  they both try to minimize their average fixed costs.
E)  they set the price such that marginal revenue equals average total cost.F) C) and D)
G) A) and E)

Question 2

Excess capacity in monopolistically competitive firms occurs because

Accepted Answer

A)  each firm faces a demand that is perfectly elastic.
B)  each firm builds a huge plant.
C)  the existence of slightly differentiated products, serving almost the same purpose, causes a waste of precious natural resources.
D)  firms produce an output that is less than the output at minimum average total cost.
E)  marginal cost is too high.F) A) and B)
G) A) and C)

Question 3

Use the table below to answer the following question.
Table 14.2.1
 
-Refer to Table 14.2.1.Sara is a dot.com entrepreneur who sells sweatshirts.She pays $1,000 a week for her Web server and Internet connection.She pays the firm that makes the sweatshirts $20 a sweatshirt.Sara has no other costs.The table sets out the demand schedule for Sara's sweatshirts.
Other firms ________ enter the Web sweatshirt business and compete with Sara.
In the long run,the demand for Sara's sweatshirts ________ and her economic profit ________.

Accepted Answer

A)  will;decreases;falls to zero
B)  will not;decreases;falls to zero
C)  will;increases;increases
D)  will not;increases;increases
E)  will;increases;falls to zeroF) All of the above
G) B) and E) A

Question 4

Use the figure below to answer the following questions.
  
Figure 14.2.3
-Refer to Figure 14.2.3.Assume this firm faces demand curve D?.At the profit-maximizing output level,the firm

Accepted Answer

A)  incurs an economic loss.
B)  makes zero economic profit.
C)  makes an economic profit.
D)  is not in a long-run equilibrium.
E)  is producing at its efficient scale.F) A) and B)
G) None of the above

Question 5

A firm has excess capacity if

Accepted Answer

A)  it produces above its efficient scale.
B)  it produces below its efficient scale.
C)  it produces the same level as its efficient scale.
D)  it sells some of its factors of production.
E)  it improves the quality of its factors of production.F) A) and D)
G) C) and D)

Question 6

Choose the correct statement about firms in monopolistic competition.

Accepted Answer

A)  A firm must lower its price to sell a greater quantity.
B)  A firm can never incur an economic loss.
C)  Price is never more than marginal cost.
D)  Firms offer identical products.
E)  The most a firm can make is zero economic profit.F) A) and D)
G) B) and E)

Question 7

Use the information below to answer the following questions.
Fact 14.3.2
Suppose that Tommy Hilfiger's marginal cost of a jacket is $100 (a constant marginal cost) and at one of the firm's shops, total fixed cost is $2,000 a day.
The profit-maximizing number of jackets sold in this shop is 20 a day.
Then the shops nearby start to advertise their jackets.The Tommy Hilfiger shop now spends $2,000 a day advertising its jackets, and its profit-maximizing number of jackets sold jumps to 50 a day.
-Refer to Fact 14.3.2.Tommy Hilfiger uses advertising as a signal because

Accepted Answer

A)  when Tommy Hilfiger advertises, it forces its competitors to advertise, which raises the competition's average total cost and increases the possibility of the competition incurring an economic loss and leaving the market.
B)  only firms that can afford advertising have longevity and will be able to honor any future obligations to its customers.
C)  by spending large sums of advertising Tommy Hilfiger is signaling that its jackets are high quality.
D)  advertising encourages people to spend regardless of the quality.
E)  advertising always increases demand and creates a more efficient market.F) B) and D)
G) A) and B)

Question 8

Use the figure below to answer the following questions.
  
Figure 14.2.3
-Refer to Figure 14.2.3.Assume this firm faces demand curve D?.To maximize economic profit,this firm in monopolistic competition will charge a price of ________ and produce an output of ________ units.

Accepted Answer

A)  $100;200
B)  $90;220
C)  $80;200
D)  $70;100
E)  $55;140F) A) and B)
G) None of the above

Question 9

When comparing perfect competition and monopolistic competition,we find that

Accepted Answer

A)  firms in monopolistic competition produce identical products just as do firms in perfect competition.
B)  firms in monopolistic competition face barriers to entry, unlike firms in perfect competition.
C)  advertising plays a large role in monopolistic competition, unlike in perfect competition.
D)  firms in monopolistic competition are price takers just as is the case for firms in perfect competition.
E)  firms in monopolistic competition each have a large market share.F) A) and B)
G) C) and D)

Question 10

Which one of the following is true for perfect competition,monopolistic competition,and single-price monopoly?

Accepted Answer

A)  Each firm produces an identical good.
B)  Each firm makes zero long-run economic profit.
C)  The profit maximizing quantity occurs at the quantity at which MC = MR.
D)  Easy entry and exit.
E)  None of the above.F) C) and D)
G) B) and E)

Question 11

Monopolistic competition might be efficient if

Accepted Answer

A)  firms invested in technology that decreased the marginal cost of production.
B)  more firms entered the industry.
C)  firms left the industry.
D)  the loss that arises because the quantity produced is less than the efficient quantity is offset by the gain that arises from having a greater degree of product variety.
E)  firms made more use of brand names.F) A) and B)
G) A) and C)

Question 12

Use the figure below to answer the following questions.
  
Figure 14.2.3
-Refer to Figure 14.2.3.Assume this firm faces demand curve D?.To maximize economic profit,this firm in monopolistic competition will charge a price of ________ and produce an output of ________ units.

Accepted Answer

A)  $40;100
B)  $90;220
C)  $80;200
D)  $55;140
E)  $70;100F) A) and D)
G) All of the above

Question 13

Firms in monopolistic competition constantly develop new products in an effort to

Accepted Answer

A)  increase the demand for their product.
B)  make the demand for their product unit elastic.
C)  increase the marginal cost of their product.
D)  decrease average total cost.
E)  decrease average fixed cost.F) None of the above
G) C) and E)

Question 14

Product differentiation exists within an industry when

Accepted Answer

A)  there are no substitutes for the product.
B)  the firm can sell all it wants at the given price.
C)  the market is a monopoly.
D)  the market is perfectly competitive.
E)  there are close but not perfect substitutes for the product.F) B) and E)
G) C) and D)

Question 15

Use the figure below to answer the following questions.
  ATC and MR = MC. B) P > ATC and MR > MC. C) P = ATC and MR = MC. D) P = ATC and MR > MC. E) P > ATC and MC > ATC." class="answers-bank-image d-inline" rel="preload" > 
Figure 14.2.6
-In the long-run,a firm in monopolistic competition produces at an output level where

Accepted Answer

A)  P > ATC and MR = MC.
B)  P > ATC and MR > MC.
C)  P = ATC and MR = MC.
D)  P = ATC and MR > MC.
E)  P > ATC and MC > ATC.F) B) and C)
G) A) and E) C

Question 16

One factor that distinguishes a monopoly from monopolistic competition is that

Accepted Answer

A)  firms in monopolistic competition practice collusion.
B)  no barriers to entry exist in a monopoly.
C)  barriers to exit exist in monopolistic competition.
D)  close substitutes are available in monopolistic competition.
E)  firms are price-takers in monopolistic competition.F) B) and E)
G) None of the above

Question 17

Consider a monopolistically competitive industry in long-run equilibrium.Suppose there is a large increase in wages that raises the costs for all firms.What happens within each firm in the short run?

Accepted Answer

A)  They will be forced to close down due to the excess costs.
B)  They will continue producing as before, cushioned by their previous excess profits.
C)  They will expand output and try to make up for lost profits.
D)  They will lower prices and try to steal customers away from their rivals.
E)  They will decrease production and produce the quantity at which marginal revenue equals the new (higher) marginal cost curve;this means a rise in price.F) B) and D)
G) D) and E)

Question 18

Because consumers value product variety,

Accepted Answer

A)  society must be more efficient with monopolistic competition than with perfect competition.
B)  the inefficiency of monopolistic competition is partially offset.
C)  in the long run, monopolistic competition firms make economic profit.
D)  monopolistically competitive industries are efficient.
E)  no two goods of the same type will have equal prices.F) A) and D)
G) B) and E)

Question 19

An advantage of monopolistic competition over perfect competition is

Accepted Answer

A)  economic profit.
B)  product variety.
C)  excess capacity.
D)  efficiency.
E)  economies of scale.F) A) and B)
G) A) and C)

Question 20

Monopolistically competitive firms engaging in advertising will definitely achieve which of the following?

Accepted Answer

A)  an increase in demand
B)  an increase in average total cost
C)  an increase in total cost
D)  Both B and C are correct.
E)  A, B, and C are correct.F) A) and E)
G) B) and C) C

Exam 14: Monopolistic Competition

In the short-run,the similarity between a monopolist and a monopolistically competitive firm is that

Correct Answer
verified

Excess capacity in monopolistically competitive firms occurs because

Correct Answer
verified

Correct Answer
verified
A

Use the figure below to answer the following questions. Figure 14.2.3 -Refer to Figure 14.2.3.Assume this firm faces demand curve D?.At the profit-maximizing output level,the firm

Correct Answer
verified

A firm has excess capacity if

Correct Answer
verified

Choose the correct statement about firms in monopolistic competition.

Correct Answer
verified

Correct Answer
verified

Use the figure below to answer the following questions. Figure 14.2.3 -Refer to Figure 14.2.3.Assume this firm faces demand curve D?.To maximize economic profit,this firm in monopolistic competition will charge a price of and produce an output of units.

Correct Answer
verified

When comparing perfect competition and monopolistic competition,we find that

Correct Answer
verified

Which one of the following is true for perfect competition,monopolistic competition,and single-price monopoly?

Correct Answer
verified

Monopolistic competition might be efficient if

Correct Answer
verified

Use the figure below to answer the following questions. Figure 14.2.3 -Refer to Figure 14.2.3.Assume this firm faces demand curve D?.To maximize economic profit,this firm in monopolistic competition will charge a price of and produce an output of units.

Correct Answer
verified

Firms in monopolistic competition constantly develop new products in an effort to

Correct Answer
verified

Product differentiation exists within an industry when

Correct Answer
verified

Use the figure below to answer the following questions. Figure 14.2.6 -In the long-run,a firm in monopolistic competition produces at an output level where

Correct Answer
verified
C

One factor that distinguishes a monopoly from monopolistic competition is that

Correct Answer
verified

Consider a monopolistically competitive industry in long-run equilibrium.Suppose there is a large increase in wages that raises the costs for all firms.What happens within each firm in the short run?

Correct Answer
verified

Because consumers value product variety,

Correct Answer
verified

An advantage of monopolistic competition over perfect competition is

Correct Answer
verified

Monopolistically competitive firms engaging in advertising will definitely achieve which of the following?

Correct Answer
verified
C

Exam 14: Monopolistic Competition

In the short-run,the similarity between a monopolist and a monopolistically competitive firm is that

Correct AnswerverifiedShow Answer

Excess capacity in monopolistically competitive firms occurs because

Correct AnswerverifiedShow Answer

Correct AnswerverifiedA

Use the figure below to answer the following questions. Figure 14.2.3 -Refer to Figure 14.2.3.Assume this firm faces demand curve D?.At the profit-maximizing output level,the firm

Correct AnswerverifiedShow Answer

A firm has excess capacity if

Correct AnswerverifiedShow Answer

Choose the correct statement about firms in monopolistic competition.

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Use the figure below to answer the following questions. Figure 14.2.3 -Refer to Figure 14.2.3.Assume this firm faces demand curve D?.To maximize economic profit,this firm in monopolistic competition will charge a price of ________ and produce an output of ________ units.

Correct AnswerverifiedShow Answer

When comparing perfect competition and monopolistic competition,we find that

Correct AnswerverifiedShow Answer

Which one of the following is true for perfect competition,monopolistic competition,and single-price monopoly?

Correct AnswerverifiedShow Answer

Monopolistic competition might be efficient if

Correct AnswerverifiedShow Answer

Use the figure below to answer the following questions. Figure 14.2.3 -Refer to Figure 14.2.3.Assume this firm faces demand curve D?.To maximize economic profit,this firm in monopolistic competition will charge a price of ________ and produce an output of ________ units.

Correct AnswerverifiedShow Answer

Firms in monopolistic competition constantly develop new products in an effort to

Correct AnswerverifiedShow Answer

Product differentiation exists within an industry when

Correct AnswerverifiedShow Answer

Use the figure below to answer the following questions. Figure 14.2.6 -In the long-run,a firm in monopolistic competition produces at an output level where

Correct AnswerverifiedC

One factor that distinguishes a monopoly from monopolistic competition is that

Correct AnswerverifiedShow Answer

Consider a monopolistically competitive industry in long-run equilibrium.Suppose there is a large increase in wages that raises the costs for all firms.What happens within each firm in the short run?

Correct AnswerverifiedShow Answer

Because consumers value product variety,

Correct AnswerverifiedShow Answer

An advantage of monopolistic competition over perfect competition is

Correct AnswerverifiedShow Answer

Monopolistically competitive firms engaging in advertising will definitely achieve which of the following?

Correct AnswerverifiedC

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified
A

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Use the figure below to answer the following questions. Figure 14.2.3 -Refer to Figure 14.2.3.Assume this firm faces demand curve D?.To maximize economic profit,this firm in monopolistic competition will charge a price of and produce an output of units.

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Use the figure below to answer the following questions. Figure 14.2.3 -Refer to Figure 14.2.3.Assume this firm faces demand curve D?.To maximize economic profit,this firm in monopolistic competition will charge a price of and produce an output of units.

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified
C

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified
C