Question 1

Monopolistic competition describes an industry characterized by a _____ number of firms producing _____ products with _____ entry.

Accepted Answer

A) small;identical;barriers to 
B) small;similar;relatively easy 
C) large;similar;relatively easy 
D) large;identical;relatively easy 
A) small;identical;barriers to 
B) small;similar;relatively easy 
C) large;similar;relatively easy 
D) large;identical;relatively easy

Question 2

In long-run equilibrium in perfect competition,price is:

Accepted Answer

A) greater than average total cost. 
B) equal to average total cost at an output below the point where average total cost is minimized. 
C) equal to average total cost at its minimum. 
D) equal to average total cost at an output above the point where average total cost is minimized. 
A) greater than average total cost. 
B) equal to average total cost at an output below the point where average total cost is minimized. 
C) equal to average total cost at its minimum. 
D) equal to average total cost at an output above the point where average total cost is minimized.

Question 3

The downward-sloping demand curve for a monopolistically competitive firm:

Accepted Answer

A) reflects product differentiation. 
B) eventually will become perfectly elastic as more firms enter. 
C) indicates collusion among firms in the industry. 
D) ensures that the firm will produce at minimum average cost in the long run. 
A) reflects product differentiation. 
B) eventually will become perfectly elastic as more firms enter. 
C) indicates collusion among firms in the industry. 
D) ensures that the firm will produce at minimum average cost in the long run.

Question 4

Because most communities have a large number of similar but not identical substitutes,the market for financial planners is BEST considered to be:

Accepted Answer

A) a monopoly. 
B) an oligopoly. 
C) perfect competition. 
D) monopolistically competitive. 
A) a monopoly. 
B) an oligopoly. 
C) perfect competition. 
D) monopolistically competitive.

Question 5

In long-run equilibrium,monopolistic competitors produce at the minimum point on the average total cost curve.

Accepted Answer

A) True 
 B)False

Question 6

Use the following to answer question:  
-Table: Spring Water.The table shows the demand and cost data for a firm in a monopolistically competitive industry producing drinking water from underground springs.The profit-maximizing price is:

Accepted Answer

A) $16. 
B) $3. 
C) $5. 
D) $10. 
A) $16. 
B) $3. 
C) $5. 
D) $10.

Question 7

A brand name may be valuable because it differentiates a company's products in the minds of consumers.

Accepted Answer

A) True 
 B)False

Question 8

Advertising is more likely to occur in perfect competition than in monopolistic competition.

Accepted Answer

A) True 
 B)False

Question 9

The model of monopolistic competition characterizes the market for plumbing services in a city.This market is initially in long-run equilibrium,but then there is an increase in market demand for plumbing services.We expect that in the long run:

Accepted Answer

A) firms will leave the plumbing market. 
B) there will be a short-run increase in the number of firms,but then the number will return to the original level. 
C) new firms will enter the plumbing market. 
D) firms will shut down,but they will not leave the industry. 
A) firms will leave the plumbing market. 
B) there will be a short-run increase in the number of firms,but then the number will return to the original level. 
C) new firms will enter the plumbing market. 
D) firms will shut down,but they will not leave the industry.

Question 10

Economics textbooks are an example of product differentiation by type and style.

Accepted Answer

A) True 
 B)False

Question 11

Monopolistic competition is similar to perfect competition because firms in both market structures:

Accepted Answer

A) are price takers. 
B) produce goods that are perfect substitutes. 
C) find it beneficial to advertise. 
D) do not face any barriers to entry to the industry in the long run. 
A) are price takers. 
B) produce goods that are perfect substitutes. 
C) find it beneficial to advertise. 
D) do not face any barriers to entry to the industry in the long run.

Question 12

The market for grade A large eggs in California is BEST considered to be an example of:

Accepted Answer

A) perfect competition. 
B) monopolistic competition. 
C) oligopoly. 
D) monopoly. 
A) perfect competition. 
B) monopolistic competition. 
C) oligopoly. 
D) monopoly.

Question 13

Use the following to answer question:
Figure: Firms in Monopolistic Competition  
-(Figure: Firms in Monopolistic Competition)Use Figure: Firms in Monopolistic Competition.A positive economic profit will be earned if the profit-maximizing price is _____ in panel _____.

Accepted Answer

A) F; (
A)  
B) G; (
A)  
C) H; (
B)  
D) I; (
C)  
A) F; (
A)  
B) G; (
A)  
C) H; (
B)  
D) I; (
C)

Question 14

Since a monopolistically competitive firm has the same long-run profits as a perfectly competitive firm,both types of industries are efficient.

Accepted Answer

A) True 
 B)False

Question 15

Use the following to answer question:
Figure: The Market for Gas Stations  
-(Figure: The Market for Gas Stations)Use Figure: The Market for Gas Stations.The figure shows curves facing a typical gas station in a large town.The market is characterized by many firms,differentiated products,easy entry,and easy exit.If the gas station here is typical,then in the long run,we would expect to observe:

Accepted Answer

A) a few gas stations leaving the market. 
B) new gas stations entering the market. 
C) neither entry nor exit. 
D) many gas stations leaving the market. 
A) a few gas stations leaving the market. 
B) new gas stations entering the market. 
C) neither entry nor exit. 
D) many gas stations leaving the market.

Question 16

Some economists think that advertising is a waste of resources because:

Accepted Answer

A) rational consumers end up spending too little on brand names. 
B) consumers may buy things they do not need. 
C) advertising creates excess capacity. 
D) advertising leads to lower costs for goods and services. 
A) rational consumers end up spending too little on brand names. 
B) consumers may buy things they do not need. 
C) advertising creates excess capacity. 
D) advertising leads to lower costs for goods and services.

Question 17

Industries that are made up of many competing producers,each selling a differentiated product,and whose firms earn zero economic profits in the long run are:

Accepted Answer

A) perfectly competitive. 
B) monopolies. 
C) oligopolies. 
D) monopolistically competitive. 
A) perfectly competitive. 
B) monopolies. 
C) oligopolies. 
D) monopolistically competitive.

Question 18

Monopolistically competitive firms produce less than the output at which average total cost is minimized in the long run.As a result,there is:

Accepted Answer

A) irrational capacity. 
B) excess capacity. 
C) product differentiation. 
D) zero economic profit. 
A) irrational capacity. 
B) excess capacity. 
C) product differentiation. 
D) zero economic profit.

Question 19

A monopolistically competitive industry is characterized by a _____ number of firms producing _____ products with _____ entry.

Accepted Answer

A) small;identical;barriers to 
B) small;similar;relatively easy 
C) large;similar;relatively easy 
D) large;identical;relatively easy 
A) small;identical;barriers to 
B) small;similar;relatively easy 
C) large;similar;relatively easy 
D) large;identical;relatively easy

Question 20

A monopolistically competitive firm will earn maximum profit if it produces at the lowest possible average total cost.

Accepted Answer

A) True 
 B)False

Exam 15: Monopolistic Competition and Product Differentiation

Monopolistic competition describes an industry characterized by a _____ number of firms producing _____ products with _____ entry.

In long-run equilibrium in perfect competition,price is:

The downward-sloping demand curve for a monopolistically competitive firm:

Because most communities have a large number of similar but not identical substitutes,the market for financial planners is BEST considered to be:

In long-run equilibrium,monopolistic competitors produce at the minimum point on the average total cost curve.

Use the following to answer question: -Table: Spring Water.The table shows the demand and cost data for a firm in a monopolistically competitive industry producing drinking water from underground springs.The profit-maximizing price is:

A brand name may be valuable because it differentiates a company's products in the minds of consumers.

Advertising is more likely to occur in perfect competition than in monopolistic competition.

The model of monopolistic competition characterizes the market for plumbing services in a city.This market is initially in long-run equilibrium,but then there is an increase in market demand for plumbing services.We expect that in the long run:

Economics textbooks are an example of product differentiation by type and style.

Monopolistic competition is similar to perfect competition because firms in both market structures:

The market for grade A large eggs in California is BEST considered to be an example of:

Use the following to answer question: Figure: Firms in Monopolistic Competition -(Figure: Firms in Monopolistic Competition)Use Figure: Firms in Monopolistic Competition.A positive economic profit will be earned if the profit-maximizing price is _____ in panel _____.

Since a monopolistically competitive firm has the same long-run profits as a perfectly competitive firm,both types of industries are efficient.

Some economists think that advertising is a waste of resources because:

Industries that are made up of many competing producers,each selling a differentiated product,and whose firms earn zero economic profits in the long run are:

Monopolistically competitive firms produce less than the output at which average total cost is minimized in the long run.As a result,there is:

A monopolistically competitive industry is characterized by a _____ number of firms producing _____ products with _____ entry.

A monopolistically competitive firm will earn maximum profit if it produces at the lowest possible average total cost.

First Principles

Economic Models: Trade-Offs and Trade

Consumer and Producer Surplus

Supply and Demand

Price Controls and Quotas: Meddling With Markets

Elasticity

Taxes

International Trade

Decision Making by Individuals and Firms

The Rational Consumer

Behind the Supply Curve: Inputs and Costs

Perfect Competition and the Supply Curve

Monopoly

Oligopoly

Externalities

Public Goods and Common Resources

The Economics of the Welfare State

Factor Markets and the Distribution of Income

Uncertainty, Risk, and Private Information

Graphs in Economics

Consumer Preferences and Consumer Choice

Filters

Monopolistic competition describes an industry characterized by a ___ number of firms producing _ products with ___ entry.

Use the following to answer question: Figure: Firms in Monopolistic Competition -(Figure: Firms in Monopolistic Competition)Use Figure: Firms in Monopolistic Competition.A positive economic profit will be earned if the profit-maximizing price is _ in panel _.

A monopolistically competitive industry is characterized by a ___ number of firms producing _ products with ___ entry.