Question 1

The problem of wasteful duplication in monopolistic competition is due to:

Accepted Answer

A) excess capacity. 
B) a lack of physical and human capital. 
C) barriers to entry. 
D) the lack of close substitutes for products produced by monopolistically competitive firms. 
A) excess capacity. 
B) a lack of physical and human capital. 
C) barriers to entry. 
D) the lack of close substitutes for products produced by monopolistically competitive firms.

Question 2

Gas stations are not monopolistically competitive because everyone knows the gasoline is the same,regardless of where it is purchased.

Accepted Answer

A) True 
 B)False

Question 3

Use the following to answer question:
Figure: Profit Maximization in Monopolistic Competition  
-(Figure: Profit Maximization in Monopolistic Competition)Use Figure: Profit Maximization in Monopolistic Competition.In panel (A)of the figure,the profit-maximizing price and quantity are _____ and _____.

Accepted Answer

A) S;M 
B) P;M 
C) P;Q 
D) T;Q 
A) S;M 
B) P;M 
C) P;Q 
D) T;Q

Question 4

The price for a firm under monopolistic competition is _____ revenue.

Accepted Answer

A) equal to marginal 
B) greater than marginal 
C) less than marginal 
D) greater than total 
A) equal to marginal 
B) greater than marginal 
C) less than marginal 
D) greater than total

Question 5

Monopolistic competition describes an industry characterized by:

Accepted Answer

A) a product with no close substitutes. 
B) many firms,each with some market power. 
C) a small number of firms. 
D) barriers to entry and exit. 
A) a product with no close substitutes. 
B) many firms,each with some market power. 
C) a small number of firms. 
D) barriers to entry and exit.

Question 6

A(n)_____ market has a single firm and _____,whereas a(n)_____ market has _____ firm(s)and _____.

Accepted Answer

A) oligopolistic;no barriers to entry;monopolistic;many;easy entry and exit 
B) monopolistic;barriers to entry;monopolistically competitive;many;easy entry and exit 
C) monopolistic;barriers to entry;oligopolistic;few;no barriers to entry 
D) monopolistically competitive;barriers to entry;monopolistic;one;barriers to entry 
A) oligopolistic;no barriers to entry;monopolistic;many;easy entry and exit 
B) monopolistic;barriers to entry;monopolistically competitive;many;easy entry and exit 
C) monopolistic;barriers to entry;oligopolistic;few;no barriers to entry 
D) monopolistically competitive;barriers to entry;monopolistic;one;barriers to entry

Question 7

Competition limits the price a monopolistically competitive firm can set.

Accepted Answer

A) True 
 B)False

Question 8

If a firm operating in monopolistic competition is producing a quantity at which _____,then the marginal decision rule tells us that profit _____.

Accepted Answer

A) MC > MR;can be increased by increasing production 
B) MC  MR;is maximized 
A) MC > MR;can be increased by increasing production 
B) MC  MR;is maximized

Question 9

Monopolistic competition is characterized by:

Accepted Answer

A) free entry and exit in the long run. 
B) each firm producing a standardized product. 
C) few producers. 
D) barriers to entry. 
A) free entry and exit in the long run. 
B) each firm producing a standardized product. 
C) few producers. 
D) barriers to entry.

Question 10

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'.Before the innovation reduced the cost,the firm's economic profit at the profit-maximizing quantity was:

Accepted Answer

A) $0. 
B) $30. 
C) $750. 
D) $4,500. 
A) $0. 
B) $30. 
C) $750. 
D) $4,500.

Question 11

Which statement about advertising is TRUE?

Accepted Answer

A) There is no role for advertising in perfect competition. 
B) Firms in monopolistic competition and oligopoly use advertising without the expectation of increasing profit. 
C) Advertising has costs but few if any benefits. 
D) Advertising is critical in the long run but not the short run. 
A) There is no role for advertising in perfect competition. 
B) Firms in monopolistic competition and oligopoly use advertising without the expectation of increasing profit. 
C) Advertising has costs but few if any benefits. 
D) Advertising is critical in the long run but not the short run.

Question 12

Defenders of advertising argue that it:

Accepted Answer

A) seeks to persuade,rather than inform,buyers. 
B) provides education and information about products. 
C) facilitates the concentration of monopoly power. 
D) encourages artificial product differentiation. 
A) seeks to persuade,rather than inform,buyers. 
B) provides education and information about products. 
C) facilitates the concentration of monopoly power. 
D) encourages artificial product differentiation.

Question 13

In a monopolistically competitive industry:

Accepted Answer

A) a firm maximizes profits when MR = MC yet P > MC. 
B) people would be better off if output were reduced. 
C) output could be increased without an increase in total cost. 
D) to maximize profits,firms set MR = MC,and people would be better off if output were reduced. 
A) a firm maximizes profits when MR = MC yet P > MC. 
B) people would be better off if output were reduced. 
C) output could be increased without an increase in total cost. 
D) to maximize profits,firms set MR = MC,and people would be better off if output were reduced.

Question 14

Critics of advertising argue that it:

Accepted Answer

A) tends to make markets more perfect. 
B) leads to low-cost mass production. 
C) results in higher prices to consumers. 
D) encourages competition through new-product advertising. 
A) tends to make markets more perfect. 
B) leads to low-cost mass production. 
C) results in higher prices to consumers. 
D) encourages competition through new-product advertising.

Question 15

Use the following to answer question:
Figure: Profits in Monopolistic Competition  
-(Figure: Profits in Monopolistic Competition)Use Figure: Profits in Monopolistic Competition.In panel (A)of the figure,the profit-maximizing quantity of output is determined by the intersection at point:

Accepted Answer

A) G. 
B) F. 
C) H. 
D) C. 
A) G. 
B) F. 
C) H. 
D) C.

Question 16

In monopolistic competition:

Accepted Answer

A) firms earn zero economic profits in the long run. 
B) each firm produces a product identical to that of every other firm in the industry. 
C) firms are aware of their strategic interdependence. 
D) firms earn large economic profits in the long run. 
A) firms earn zero economic profits in the long run. 
B) each firm produces a product identical to that of every other firm in the industry. 
C) firms are aware of their strategic interdependence. 
D) firms earn large economic profits in the long run.

Question 17

The _____ demand curve for a firm operating in a monopolistically competitive market _____ facing a perfectly competitive firm.

Accepted Answer

A) downward-sloping;is the same as the demand curve 
B) downward-sloping;differs from the horizontal demand curve 
C) horizontal;differs from the downward-sloping demand curve 
D) horizontal;is the same as the demand curve 
A) downward-sloping;is the same as the demand curve 
B) downward-sloping;differs from the horizontal demand curve 
C) horizontal;differs from the downward-sloping demand curve 
D) horizontal;is the same as the demand curve

Question 18

Monopolistic competition describes an industry characterized by:

Accepted Answer

A) a product with many close substitutes. 
B) a horizontal demand curve. 
C) a small number of firms. 
D) barriers to entry and exit. 
A) a product with many close substitutes. 
B) a horizontal demand curve. 
C) a small number of firms. 
D) barriers to entry and exit.

Question 19

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 market.In the long run:

Accepted Answer

A) restaurants will leave the market. 
B) restaurants will enter the market. 
C) restaurants will neither enter nor exit the market. 
D) Not enough information is given to answer the question. 
A) restaurants will leave the market. 
B) restaurants will enter the market. 
C) restaurants will neither enter nor exit the market. 
D) Not enough information is given to answer the question.

Question 20

(Scenario: Monopolistically Competitive Firm)Use Scenario: Monopolistically Competitive Firm.Given the information in the scenario,what is the profit-maximizing level of output for this firm in the short run? Scenario: Monopolistically Competitive Firm
For a monopolistically competitive firm,the demand curve is given by Q = 160 - P,and the firm's cost functions are: MC = 20 + 2Q and TC = 20Q + Q2 + 20.

Accepted Answer

A) 160 units 
B) 20 units 
C) 35 units 
D) 180 units 
A) 160 units 
B) 20 units 
C) 35 units 
D) 180 units

The problem of wasteful duplication in monopolistic competition is due to:

Gas stations are not monopolistically competitive because everyone knows the gasoline is the same,regardless of where it is purchased.

Use the following to answer question: Figure: Profit Maximization in Monopolistic Competition -(Figure: Profit Maximization in Monopolistic Competition)Use Figure: Profit Maximization in Monopolistic Competition.In panel (A)of the figure,the profit-maximizing price and quantity are _ and _.

The price for a firm under monopolistic competition is _____ revenue.

Monopolistic competition describes an industry characterized by:

A(n)___ market has a single firm and _,whereas a(n)_ market has _ firm(s)and ___.

Competition limits the price a monopolistically competitive firm can set.

If a firm operating in monopolistic competition is producing a quantity at which _,then the marginal decision rule tells us that profit _.

Monopolistic competition is characterized by:

Which statement about advertising is TRUE?

Defenders of advertising argue that it:

In a monopolistically competitive industry:

Critics of advertising argue that it:

Use the following to answer question: Figure: Profits in Monopolistic Competition -(Figure: Profits in Monopolistic Competition)Use Figure: Profits in Monopolistic Competition.In panel (A)of the figure,the profit-maximizing quantity of output is determined by the intersection at point:

In monopolistic competition:

The _ demand curve for a firm operating in a monopolistically competitive market _ facing a perfectly competitive firm.

Monopolistic competition describes an industry characterized by:

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 market.In the long run:

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 problem of wasteful duplication in monopolistic competition is due to:

Gas stations are not monopolistically competitive because everyone knows the gasoline is the same,regardless of where it is purchased.

Use the following to answer question: Figure: Profit Maximization in Monopolistic Competition -(Figure: Profit Maximization in Monopolistic Competition)Use Figure: Profit Maximization in Monopolistic Competition.In panel (A)of the figure,the profit-maximizing price and quantity are _____ and _____.

The price for a firm under monopolistic competition is _____ revenue.

Monopolistic competition describes an industry characterized by:

A(n)_____ market has a single firm and _____,whereas a(n)_____ market has _____ firm(s)and _____.

Competition limits the price a monopolistically competitive firm can set.

If a firm operating in monopolistic competition is producing a quantity at which _____,then the marginal decision rule tells us that profit _____.

Monopolistic competition is characterized by:

Which statement about advertising is TRUE?

Defenders of advertising argue that it:

In a monopolistically competitive industry:

Critics of advertising argue that it:

Use the following to answer question: Figure: Profits in Monopolistic Competition -(Figure: Profits in Monopolistic Competition)Use Figure: Profits in Monopolistic Competition.In panel (A)of the figure,the profit-maximizing quantity of output is determined by the intersection at point:

In monopolistic competition:

The _____ demand curve for a firm operating in a monopolistically competitive market _____ facing a perfectly competitive firm.

Monopolistic competition describes an industry characterized by:

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 market.In the long run:

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

Use the following to answer question: Figure: Profit Maximization in Monopolistic Competition -(Figure: Profit Maximization in Monopolistic Competition)Use Figure: Profit Maximization in Monopolistic Competition.In panel (A)of the figure,the profit-maximizing price and quantity are _ and _.

A(n)___ market has a single firm and _,whereas a(n)_ market has _ firm(s)and ___.

If a firm operating in monopolistic competition is producing a quantity at which _,then the marginal decision rule tells us that profit _.

The _ demand curve for a firm operating in a monopolistically competitive market _ facing a perfectly competitive firm.