Question 1

The demand curve for a firm in monopolistic competition is _____ facing a perfectly competitive firm.

Accepted Answer

A) downward sloping,unlike the horizontal demand curve 
B) horizontal,unlike the downward-sloping demand curve 
C) horizontal,the same as that 
D) downward sloping,the same as that 
A) downward sloping,unlike the horizontal demand curve 
B) horizontal,unlike the downward-sloping demand curve 
C) horizontal,the same as that 
D) downward sloping,the same as that

Question 2

Toby operates a small deli downtown.The deli industry is monopolistically competitive.If some delis leave the industry,Toby's _____ curve will shift to the _____.

Accepted Answer

A) marginal cost;left 
B) marginal cost;right 
C) demand;left 
D) demand;right 
A) marginal cost;left 
B) marginal cost;right 
C) demand;left 
D) demand;right

Question 3

A monopolistically competitive firm may have positive or negative profits in the short run but will have zero profits in the long run.

Accepted Answer

A) True 
 B)False

Question 4

In the long run,perfect competitors and monopolistic competitors are similar in that they:

Accepted Answer

A) set price where MR < MC. 
B) produce an output level at which P = ATC. 
C) produce a product that is standardized and hard to differentiate. 
D) earn a positive economic profit. 
A) set price where MR < MC. 
B) produce an output level at which P = ATC. 
C) produce a product that is standardized and hard to differentiate. 
D) earn a positive economic profit.

Question 5

Brand names offer some assurance that the seller has a reputation to protect and hopes to be engaged in repeated transactions with its customers.

Accepted Answer

A) True 
 B)False

Question 6

Use the following to answer question:
Figure: The Restaurant Market  
-(Figure: The Restaurant Market)Use Figure: The Restaurant Market.The figure shows curves facing a typical restaurant.Assume that many firms,differentiated products,and easy entry and exit characterize the restaurant market.For the restaurant shown here,the profit per unit is represented by the vertical distance between the points:

Accepted Answer

A) a and e. 
B) f and d. 
C) b and f. 
D) b and d. 
A) a and e. 
B) f and d. 
C) b and f. 
D) b and d.

Question 7

Use the following to answer question:
Figure: Profit Maximization for a Firm in Monopolistic Competition  
-(Figure: Profit Maximization for a Firm in Monopolistic Competition)Use Figure: Profit Maximization for a Firm in Monopolistic Competition.Suppose that an innovation reduces a firm's costs from ATC to ATC'.After the innovation reduces the cost,the firm's economic profit at the new profit-maximizing quantity is:

Accepted Answer

A) $0. 
B) $30. 
C) $1,500. 
D) $3,000. 
A) $0. 
B) $30. 
C) $1,500. 
D) $3,000.

Question 8

An example of monopolistic competition is the _____ industry.

Accepted Answer

A) restaurant 
B) soft-drink 
C) automobile 
D) airline 
A) restaurant 
B) soft-drink 
C) automobile 
D) airline

Question 9

Monopolistic competitors often hire a celebrity spokesperson to advertise their product.One reason such advertising works is that:

Accepted Answer

A) celebrities are better informed about the relative merits of different products than are the rest of us. 
B) consumers assume that the celebrity has researched the product and that the claims being made on his or her behalf are true. 
C) the fact that a firm is willing to pay the large fees associated with celebrity advertising signals to consumers that it is a major company and that it is therefore likely to have a reliable product. 
D) celebrities encourage other firms to enter the industry. 
A) celebrities are better informed about the relative merits of different products than are the rest of us. 
B) consumers assume that the celebrity has researched the product and that the claims being made on his or her behalf are true. 
C) the fact that a firm is willing to pay the large fees associated with celebrity advertising signals to consumers that it is a major company and that it is therefore likely to have a reliable product. 
D) celebrities encourage other firms to enter the industry.

Question 10

Firms in monopolistic competition can gain some market power by engaging in product differentiation.

Accepted Answer

A) True 
 B)False

Question 11

In long-run equilibrium,a firm in monopolistic competition is similar to a monopoly because it:

Accepted Answer

A) earns no economic profit. 
B) charges a price equal to marginal cost. 
C) charges a price greater than marginal cost. 
D) charges a price equal to average total cost. 
A) earns no economic profit. 
B) charges a price equal to marginal cost. 
C) charges a price greater than marginal cost. 
D) charges a price equal to average total cost.

Question 12

Monopolistic competition in an industry results in:

Accepted Answer

A) overutilization of plants. 
B) chronic excess capacity. 
C) less advertising than in perfect competition. 
D) lower prices than in perfect competition. 
A) overutilization of plants. 
B) chronic excess capacity. 
C) less advertising than in perfect competition. 
D) lower prices than in perfect competition.

Question 13

A monopolistically competitive industry has some of the characteristics of perfect competition,including:

Accepted Answer

A) many firms making economic profit in the long run. 
B) easy entry and exit. 
C) identical products. 
D) easy entry and exit and identical products. 
A) many firms making economic profit in the long run. 
B) easy entry and exit. 
C) identical products. 
D) easy entry and exit and identical products.

Question 14

Use the following to answer question:
Figure: Firms in Monopolistic Competition  
-(Figure: Firms in Monopolistic Competition)Use Figure: Firms in Monopolistic Competition.A long-run equilibrium is illustrated at the profit-maximizing price _____ 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 15

Use the following to answer question:
Figure: Monopolistic Competitor  
-(Figure: Monopolistic Competitor)Use Figure: Monopolistic Competitor.If the firm shown in the figure produces at its profit-maximizing level,it will produce:

Accepted Answer

A) with excess capacity since its P is greater than MR. 
B) without excess capacity since P is greater than ATC. 
C) with excess capacity since that output level is on the downward-sloping portion of the ATC curve. 
D) without excess capacity since that output level is on the downward-sloping portion of the MR curve. 
A) with excess capacity since its P is greater than MR. 
B) without excess capacity since P is greater than ATC. 
C) with excess capacity since that output level is on the downward-sloping portion of the ATC curve. 
D) without excess capacity since that output level is on the downward-sloping portion of the MR curve.

Question 16

(Figure: Monopolistic Competition IV)Use Figure: Monopolistic Competition IV.The firm in the figure is producing at the output level that maximizes profits (minimizes losses).The shaded rectangle represents the firm's: Figure: Monopolistic Competition IV

Accepted Answer

A) profit. 
B) loss. 
C) fixed cost. 
D) variable cost. 
A) profit. 
B) loss. 
C) fixed cost. 
D) variable cost.

Question 17

Use the following to answer question:
Figure: Monopolistic Competition VI  
-(Figure: Monopolistic Competition VI)Use Figure: Monopolistic Competition VI.In the figure,in the long run firms will:

Accepted Answer

A) enter this market until all firms earn a zero economic profit. 
B) exit this market until all remaining firms earn a zero economic profit. 
C) enter this market,leading to excess profit for all of the firms. 
D) exit this market,leading to excess profit for all of the remaining firms. 
A) enter this market until all firms earn a zero economic profit. 
B) exit this market until all remaining firms earn a zero economic profit. 
C) enter this market,leading to excess profit for all of the firms. 
D) exit this market,leading to excess profit for all of the remaining firms.

Question 18

Monopolistically competitive firms have zero economic profits in the long run because of:

Accepted Answer

A) excess capacity. 
B) price wars among firms. 
C) easy entry and exit. 
D) excessive advertising. 
A) excess capacity. 
B) price wars among firms. 
C) easy entry and exit. 
D) excessive advertising.

Question 19

The fact that firms in a monopolistically competitive industry are competing for a limited market is called competition among sellers.

Accepted Answer

A) True 
 B)False

Question 20

Only irrational consumers are affected by advertising.

Accepted Answer

A) True 
 B)False

The demand curve for a firm in monopolistic competition is _____ facing a perfectly competitive firm.

Toby operates a small deli downtown.The deli industry is monopolistically competitive.If some delis leave the industry,Toby's _ curve will shift to the _.

A monopolistically competitive firm may have positive or negative profits in the short run but will have zero profits in the long run.

In the long run,perfect competitors and monopolistic competitors are similar in that they:

Brand names offer some assurance that the seller has a reputation to protect and hopes to be engaged in repeated transactions with its customers.

An example of monopolistic competition is the _____ industry.

Monopolistic competitors often hire a celebrity spokesperson to advertise their product.One reason such advertising works is that:

Firms in monopolistic competition can gain some market power by engaging in product differentiation.

In long-run equilibrium,a firm in monopolistic competition is similar to a monopoly because it:

Monopolistic competition in an industry results in:

A monopolistically competitive industry has some of the characteristics of perfect competition,including:

Use the following to answer question: Figure: Firms in Monopolistic Competition -(Figure: Firms in Monopolistic Competition)Use Figure: Firms in Monopolistic Competition.A long-run equilibrium is illustrated at the profit-maximizing price _ in panel _.

Use the following to answer question: Figure: Monopolistic Competitor -(Figure: Monopolistic Competitor)Use Figure: Monopolistic Competitor.If the firm shown in the figure produces at its profit-maximizing level,it will produce:

(Figure: Monopolistic Competition IV)Use Figure: Monopolistic Competition IV.The firm in the figure is producing at the output level that maximizes profits (minimizes losses).The shaded rectangle represents the firm's: Figure: Monopolistic Competition IV

Use the following to answer question: Figure: Monopolistic Competition VI -(Figure: Monopolistic Competition VI)Use Figure: Monopolistic Competition VI.In the figure,in the long run firms will:

Monopolistically competitive firms have zero economic profits in the long run because of:

The fact that firms in a monopolistically competitive industry are competing for a limited market is called competition among sellers.

Only irrational consumers are affected by advertising.

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

Exam 15: Monopolistic Competition and Product Differentiation

The demand curve for a firm in monopolistic competition is _____ facing a perfectly competitive firm.

Toby operates a small deli downtown.The deli industry is monopolistically competitive.If some delis leave the industry,Toby's _____ curve will shift to the _____.

A monopolistically competitive firm may have positive or negative profits in the short run but will have zero profits in the long run.

In the long run,perfect competitors and monopolistic competitors are similar in that they:

Brand names offer some assurance that the seller has a reputation to protect and hopes to be engaged in repeated transactions with its customers.

An example of monopolistic competition is the _____ industry.

Monopolistic competitors often hire a celebrity spokesperson to advertise their product.One reason such advertising works is that:

Firms in monopolistic competition can gain some market power by engaging in product differentiation.

In long-run equilibrium,a firm in monopolistic competition is similar to a monopoly because it:

Monopolistic competition in an industry results in:

A monopolistically competitive industry has some of the characteristics of perfect competition,including:

Use the following to answer question: Figure: Firms in Monopolistic Competition -(Figure: Firms in Monopolistic Competition)Use Figure: Firms in Monopolistic Competition.A long-run equilibrium is illustrated at the profit-maximizing price _____ in panel _____.

Use the following to answer question: Figure: Monopolistic Competitor -(Figure: Monopolistic Competitor)Use Figure: Monopolistic Competitor.If the firm shown in the figure produces at its profit-maximizing level,it will produce:

(Figure: Monopolistic Competition IV)Use Figure: Monopolistic Competition IV.The firm in the figure is producing at the output level that maximizes profits (minimizes losses).The shaded rectangle represents the firm's: Figure: Monopolistic Competition IV

Use the following to answer question: Figure: Monopolistic Competition VI -(Figure: Monopolistic Competition VI)Use Figure: Monopolistic Competition VI.In the figure,in the long run firms will:

Monopolistically competitive firms have zero economic profits in the long run because of:

The fact that firms in a monopolistically competitive industry are competing for a limited market is called competition among sellers.

Only irrational consumers are affected by advertising.

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

Toby operates a small deli downtown.The deli industry is monopolistically competitive.If some delis leave the industry,Toby's _ curve will shift to the _.

Use the following to answer question: Figure: Firms in Monopolistic Competition -(Figure: Firms in Monopolistic Competition)Use Figure: Firms in Monopolistic Competition.A long-run equilibrium is illustrated at the profit-maximizing price _ in panel _.