Question 1

In long-run equilibrium in perfect competition,marginal cost is:

Accepted Answer

A) greater than price. 
B) equal to price. 
C) less than price. 
D) related to price but not in a predictable way. 
A) greater than price. 
B) equal to price. 
C) less than price. 
D) related to price but not in a predictable way.

Question 2

Which scenario is likely to provide the LEAST amount of economic usefulness?

Accepted Answer

A) NFL player Peyton Manning is shown throwing a football in a toothpaste commercial. 
B) An online advertisement is posted at Cars.com for a 2005 Volvo S60 with 60,000 miles,a sunroof,and heated leather seats. 
C) An actor in a television commercial is describing the benefits and side effects of a new arthritis medication. 
D) A radio commercial for a local restaurant is announcing special prices during any college football broadcast. 
A) NFL player Peyton Manning is shown throwing a football in a toothpaste commercial. 
B) An online advertisement is posted at Cars.com for a 2005 Volvo S60 with 60,000 miles,a sunroof,and heated leather seats. 
C) An actor in a television commercial is describing the benefits and side effects of a new arthritis medication. 
D) A radio commercial for a local restaurant is announcing special prices during any college football broadcast.

Question 3

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

Accepted Answer

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

Question 4

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.At the profit-maximizing output,profit is:

Accepted Answer

A) $9.00. 
B) $10.00. 
C) $60.00. 
D) $7.00. 
A) $9.00. 
B) $10.00. 
C) $60.00. 
D) $7.00.

Question 5

A firm in monopolistic competition maximizes its profit by producing at a quantity where:

Accepted Answer

A) MC = ATC. 
B) MC = AR. 
C) MC = MR. 
D) MC = P. 
A) MC = ATC. 
B) MC = AR. 
C) MC = MR. 
D) MC = P.

Question 6

The demand curve for a firm operating in a monopolistically competitive market is BEST described as:

Accepted Answer

A) U-shaped. 
B) upward sloping. 
C) downward sloping. 
D) horizontal. 
A) U-shaped. 
B) upward sloping. 
C) downward sloping. 
D) horizontal.

Question 7

Use the following to answer question:
Figure: Comparing Long-Run Equilibriums  
-(Figure: Comparing Long-Run Equilibriums)Use Figure: Comparing Long-Run Equilibriums.Which statement is TRUE?

Accepted Answer

A) Firms in the market structure shown in panel (a)cannot have profits in the long run,but those in panel (b)can. 
B) Both panels show markets that have few interdependent firms. 
C) Both panels show markets that produce identical products. 
D) Both panels show markets that have many firms. 
A) Firms in the market structure shown in panel (a)cannot have profits in the long run,but those in panel (b)can. 
B) Both panels show markets that have few interdependent firms. 
C) Both panels show markets that produce identical products. 
D) Both panels show markets that have many firms.

Question 8

In the short run,a monopolistically competitive firm produces at the optimal level of output and is earning positive economic profits.Which expression must be TRUE for this firm?

Accepted Answer

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

Question 9

Monopolistic competitors:

Accepted Answer

A) have some ability to set price. 
B) must accept the price as given and therefore are price takers. 
C) produce goods that are standardized and hard to differentiate. 
D) eventually produce at their minimum ATC at the profit-maximizing level. 
A) have some ability to set price. 
B) must accept the price as given and therefore are price takers. 
C) produce goods that are standardized and hard to differentiate. 
D) eventually produce at their minimum ATC at the profit-maximizing level.

Question 10

If a firm operating in monopolistic competition is producing a quantity that generates MC = MR,then the marginal decision rule tells us that profit:

Accepted Answer

A) is maximized. 
B) can be increased by decreasing production. 
C) can be increased by decreasing the price. 
D) is maximized only if MC = P. 
A) is maximized. 
B) can be increased by decreasing production. 
C) can be increased by decreasing the price. 
D) is maximized only if MC = P.

Question 11

Use the following to answer question:
Figure: Monopolistic Competition II  
-(Figure: Monopolistic Competition II)Use Figure: Monopolistic Competition II.Which panel(s)in the figure show(s)a monopolistic competitor earning a profit in the short run?

Accepted Answer

A) panel (a)only 
B) panel (b)only 
C) panel (c)only 
D) panels (a)and (c) 
A) panel (a)only 
B) panel (b)only 
C) panel (c)only 
D) panels (a)and (c)

Question 12

Use the following to answer question:
Figure: Monopolistic Competitor  
-(Figure: Monopolistic Competitor)Use Figure: Monopolistic Competitor.If the firm shown in the figure maximizes its returns,it will:

Accepted Answer

A) earn a positive economic profit. 
B) break even. 
C) incur a loss. 
D) incur a loss equal to its MR. 
A) earn a positive economic profit. 
B) break even. 
C) incur a loss. 
D) incur a loss equal to its MR.

Question 13

Which statement is TRUE?

Accepted Answer

A) Monopolistic competition and perfect competition are both inefficient. 
B) Monopolistic competition is efficient because of product differentiation. 
C) The inefficiency of monopolistic competition is arguably a small price to pay for the wide range of product choices it offers. 
D) The inefficiency of monopolistic competition is a result of advertising expenses. 
A) Monopolistic competition and perfect competition are both inefficient. 
B) Monopolistic competition is efficient because of product differentiation. 
C) The inefficiency of monopolistic competition is arguably a small price to pay for the wide range of product choices it offers. 
D) The inefficiency of monopolistic competition is a result of advertising expenses.

Question 14

If monopolistically competitive firms are earning positive economic profits in the short run,then in the long run:

Accepted Answer

A) firms will leave the industry. 
B) the demand curves faced by existing firms will move to the right. 
C) economic profits will increase. 
D) economic profits will be reduced to zero. 
A) firms will leave the industry. 
B) the demand curves faced by existing firms will move to the right. 
C) economic profits will increase. 
D) economic profits will be reduced to zero.

Question 15

Suppose the dry-cleaning market is monopolistically competitive and economically profitable this year.In the long run,the demand for any one firm's dry-cleaning services will _____ as more firms enter the industry,causing economic profits to _____.

Accepted Answer

A) decrease;become economic losses 
B) decrease;fall to zero 
C) not change;fall 
D) increase;increase 
A) decrease;become economic losses 
B) decrease;fall to zero 
C) not change;fall 
D) increase;increase

Question 16

Suppose Susan owns a business that operates in a market characterized by monopolistic competition.Susan's profit-maximizing price is $12,her profit-maximizing output is 900 units per week,and her profits are $1,800 per week.Susan decides that she needs more profits and therefore raises her price to $15.At the new price of $15:

Accepted Answer

A) profits will increase. 
B) profits will remain at $1,800. 
C) marginal revenue will be greater than marginal cost. 
D) marginal revenue will be less than marginal cost. 
A) profits will increase. 
B) profits will remain at $1,800. 
C) marginal revenue will be greater than marginal cost. 
D) marginal revenue will be less than marginal cost.

Question 17

General Snacks is a typical firm in monopolistic competition.Initially,the market is in long-run equilibrium,and then there is an increase in the market demand for snacks.In the long run,the economic profits of typical firms in the industry will be:

Accepted Answer

A) typical of those earned by monopoly firms. 
B) positive but less than the level typically earned by monopoly firms. 
C) zero. 
D) negative. 
A) typical of those earned by monopoly firms. 
B) positive but less than the level typically earned by monopoly firms. 
C) zero. 
D) negative.

Question 18

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 industry.The restaurant shown here will maximize profits at quantity:

Accepted Answer

A) Q1. 
B) Q2. 
C) Q3. 
D) Not enough information is given to answer the question. 
A) Q1. 
B) Q2. 
C) Q3. 
D) Not enough information is given to answer the question.

Question 19

Product differentiation under monopolistic competition means that each firm:

Accepted Answer

A) charges the same price. 
B) maximizes profit where MC = P. 
C) faces a downward-sloping demand curve. 
D) always receives economic profits. 
A) charges the same price. 
B) maximizes profit where MC = P. 
C) faces a downward-sloping demand curve. 
D) always receives economic profits.

Question 20

Use the following to answer question:  
-Shops that sell live bait to people in Alabama may be monopolistically competitive if there is product differentiation and differentiation by location.

Accepted Answer

A) True 
 B)False

In long-run equilibrium in perfect competition,marginal cost is:

Which scenario is likely to provide the LEAST amount of economic usefulness?

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

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.At the profit-maximizing output,profit is:

A firm in monopolistic competition maximizes its profit by producing at a quantity where:

The demand curve for a firm operating in a monopolistically competitive market is BEST described as:

Use the following to answer question: Figure: Comparing Long-Run Equilibriums -(Figure: Comparing Long-Run Equilibriums)Use Figure: Comparing Long-Run Equilibriums.Which statement is TRUE?

In the short run,a monopolistically competitive firm produces at the optimal level of output and is earning positive economic profits.Which expression must be TRUE for this firm?

Monopolistic competitors:

If a firm operating in monopolistic competition is producing a quantity that generates MC = MR,then the marginal decision rule tells us that profit:

Use the following to answer question: Figure: Monopolistic Competition II -(Figure: Monopolistic Competition II)Use Figure: Monopolistic Competition II.Which panel(s)in the figure show(s)a monopolistic competitor earning a profit in the short run?

Use the following to answer question: Figure: Monopolistic Competitor -(Figure: Monopolistic Competitor)Use Figure: Monopolistic Competitor.If the firm shown in the figure maximizes its returns,it will:

Which statement is TRUE?

If monopolistically competitive firms are earning positive economic profits in the short run,then in the long run:

Suppose the dry-cleaning market is monopolistically competitive and economically profitable this year.In the long run,the demand for any one firm's dry-cleaning services will _ as more firms enter the industry,causing economic profits to _.

General Snacks is a typical firm in monopolistic competition.Initially,the market is in long-run equilibrium,and then there is an increase in the market demand for snacks.In the long run,the economic profits of typical firms in the industry will be:

Product differentiation under monopolistic competition means that each firm:

Use the following to answer question: -Shops that sell live bait to people in Alabama may be monopolistically competitive if there is product differentiation and differentiation by location.

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

In long-run equilibrium in perfect competition,marginal cost is:

Which scenario is likely to provide the LEAST amount of economic usefulness?

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

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.At the profit-maximizing output,profit is:

A firm in monopolistic competition maximizes its profit by producing at a quantity where:

The demand curve for a firm operating in a monopolistically competitive market is BEST described as:

Use the following to answer question: Figure: Comparing Long-Run Equilibriums -(Figure: Comparing Long-Run Equilibriums)Use Figure: Comparing Long-Run Equilibriums.Which statement is TRUE?

In the short run,a monopolistically competitive firm produces at the optimal level of output and is earning positive economic profits.Which expression must be TRUE for this firm?

Monopolistic competitors:

If a firm operating in monopolistic competition is producing a quantity that generates MC = MR,then the marginal decision rule tells us that profit:

Use the following to answer question: Figure: Monopolistic Competition II -(Figure: Monopolistic Competition II)Use Figure: Monopolistic Competition II.Which panel(s)in the figure show(s)a monopolistic competitor earning a profit in the short run?

Use the following to answer question: Figure: Monopolistic Competitor -(Figure: Monopolistic Competitor)Use Figure: Monopolistic Competitor.If the firm shown in the figure maximizes its returns,it will:

Which statement is TRUE?

If monopolistically competitive firms are earning positive economic profits in the short run,then in the long run:

Suppose the dry-cleaning market is monopolistically competitive and economically profitable this year.In the long run,the demand for any one firm's dry-cleaning services will _____ as more firms enter the industry,causing economic profits to _____.

General Snacks is a typical firm in monopolistic competition.Initially,the market is in long-run equilibrium,and then there is an increase in the market demand for snacks.In the long run,the economic profits of typical firms in the industry will be:

Product differentiation under monopolistic competition means that each firm:

Use the following to answer question: -Shops that sell live bait to people in Alabama may be monopolistically competitive if there is product differentiation and differentiation by location.

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

Suppose the dry-cleaning market is monopolistically competitive and economically profitable this year.In the long run,the demand for any one firm's dry-cleaning services will _ as more firms enter the industry,causing economic profits to _.