Question 1

A wheat farmer is more likely to advertise than is a restaurant that sells fast food hamburgers.

Accepted Answer

A) True 
 B)False

Question 2

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 the short run,a firm in monopolistic competition may earn economic profits.The profits in panel (A)of the figure are:

Accepted Answer

A) P - S. 
B) (P - S)× M. 
C) (P - S)× Q. 
D) (P - T)× Q. 
A) P - S. 
B) (P - S)× M. 
C) (P - S)× Q. 
D) (P - T)× Q.

Question 3

Use the following to answer question:
Figure: Profits in Monopolistic Competition  
-(Figure: Profits in Monopolistic Competition)Use Figure: Profits in Monopolistic Competition.A negative economic profit (or economic loss)is earned if the profit-maximizing price is _____ in panel _____.

Accepted Answer

A) E; (
B)  
B) B; (
A)  
C) N; (
C)  
D) O; (
C)  
A) E; (
B)  
B) B; (
A)  
C) N; (
C)  
D) O; (
C)

Question 4

In the short run,a monopolistically competitive firm produces at the optimal level of output and is earning positive economic profits.In the long run,the _____ of firms shifts the firm's demand and marginal revenue curves _____,which _____ the firm's level of output and _____ the price it can charge until price equals average total cost.

Accepted Answer

A) entry;leftward,decreases;decreases 
B) entry;leftward,decreases;increases 
C) entry;downward,decreases;decreases 
D) exit;rightward,increases;increases 
A) entry;leftward,decreases;decreases 
B) entry;leftward,decreases;increases 
C) entry;downward,decreases;decreases 
D) exit;rightward,increases;increases

Question 5

Firms in monopolistic competition can acquire some market power by:

Accepted Answer

A) product differentiation. 
B) engaging in tacit collusion. 
C) producing where MR > MC. 
D) increasing their output to the perfectly competitive level. 
A) product differentiation. 
B) engaging in tacit collusion. 
C) producing where MR > MC. 
D) increasing their output to the perfectly competitive level.

Question 6

(Figure: Possible Long-Run Outcome)Use Figure: Possible Long-Run Outcome.In the figure,which price and quantity refer to a potential long-run profit maximizing outcome for a firm producing in a monopolistically competitive market? Figure: Possible Long-Run Outcome

Accepted Answer

A) P1 and Q3 
B) P1 and Q1 
C) P2 and Q2 
D) P1 and Q4 
A) P1 and Q3 
B) P1 and Q1 
C) P2 and Q2 
D) P1 and Q4

Question 7

An industry with a single firm producing a product for which there are no close substitutes and that is protected by barriers to entry is 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 8

In large shopping malls,the retail clothing market is MOST illustrative of:

Accepted Answer

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

Question 9

If a monopolistically competitive firm is producing the profit-maximizing level of output and is earning an economic profit in the short run:

Accepted Answer

A) price is less than average total costs. 
B) price is less than marginal cost. 
C) marginal revenue is less than marginal cost. 
D) marginal revenue equals marginal cost. 
A) price is less than average total costs. 
B) price is less than marginal cost. 
C) marginal revenue is less than marginal cost. 
D) marginal revenue equals marginal cost.

Question 10

The demand curve for a firm operating in a monopolistically competitive industry is:

Accepted Answer

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

Question 11

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 shown here were to raise its price above the profit-maximizing price,the outcome would be _____ in total revenue.

Accepted Answer

A) a reduction 
B) an increase 
C) no change 
D) Not enough information is given to answer the question. 
A) a reduction 
B) an increase 
C) no change 
D) Not enough information is given to answer the question.

Question 12

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 (B)of the figure,the long-run equilibrium will result in:

Accepted Answer

A) no economic profits. 
B) no accounting profits. 
C) a tangency of the ATC curve with the MR curve. 
D) no economic profits and a tangency of the ATC curve with the MR curve. 
A) no economic profits. 
B) no accounting profits. 
C) a tangency of the ATC curve with the MR curve. 
D) no economic profits and a tangency of the ATC curve with the MR curve.

Question 13

Use the following to answer question:
Figure: Monopolistic Competition VI  
-(Figure: Monopolistic Competition VI)Use Figure: Monopolistic Competition VI.The figure illustrates a firm in the _____;in the _____,the demand and marginal revenue curves will shift to the _____.

Accepted Answer

A) short run;long run;right 
B) long run;short run;left 
C) short run;long run;left 
D) long run;short run;right 
A) short run;long run;right 
B) long run;short run;left 
C) short run;long run;left 
D) long run;short run;right

Question 14

In long-run equilibrium in monopolistic 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 15

Toby operates a small deli downtown.The deli industry is monopolistically competitive.Toby is producing the quantity that minimizes his average total cost.Assuming that Toby is maximizing profits,his:

Accepted Answer

A) marginal cost is less than his average total cost. 
B) marginal cost is less than his marginal revenue. 
C) price equals his average total cost. 
D) price is more than his average total cost. 
A) marginal cost is less than his average total cost. 
B) marginal cost is less than his marginal revenue. 
C) price equals his average total cost. 
D) price is more than his average total cost.

Question 16

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,prices charged by firms in the market are likely to:

Accepted Answer

A) fall in the long run. 
B) rise in the long run. 
C) remain unchanged. 
D) rise dramatically in the long run. 
A) fall in the long run. 
B) rise in the long run. 
C) remain unchanged. 
D) rise dramatically in the long run.

Question 17

Which characteristic is NOT indicative of monopolistic competition?

Accepted Answer

A) product differentiation 
B) a lack of barriers to entry and exit in the long run 
C) many competing producers 
D) tacit collusion 
A) product differentiation 
B) a lack of barriers to entry and exit in the long run 
C) many competing producers 
D) tacit collusion

Question 18

General Snacks is a typical firm in monopolistic competition.If the market is in long-run equilibrium,then the price General Snacks charges for its snack goods:

Accepted Answer

A) equals average total cost. 
B) exceeds average total cost. 
C) is less than average total cost. 
D) is more than the average for all other firms in the market. 
A) equals average total cost. 
B) exceeds average total cost. 
C) is less than average total cost. 
D) is more than the average for all other firms in the market.

Question 19

In the long run,monopolistically competitive firms tend to have:

Accepted Answer

A) high economic profits. 
B) zero economic profits. 
C) negative economic profits. 
D) substantial economic losses. 
A) high economic profits. 
B) zero economic profits. 
C) negative economic profits. 
D) substantial economic losses.

Question 20

A gas station operates in a monopolistically competitive market and is in short-run equilibrium.Suppose that a fixed cost for this firm decreases.As a result,the firm's price will _____,the firm's output will _____,and the firm's economic profit will _____.

Accepted Answer

A) increase;increase;increase 
B) increase;increase;decrease 
C) stay the same;stay the same;increase 
D) decrease;stay the same;increase 
A) increase;increase;increase 
B) increase;increase;decrease 
C) stay the same;stay the same;increase 
D) decrease;stay the same;increase

A wheat farmer is more likely to advertise than is a restaurant that sells fast food hamburgers.

Use the following to answer question: Figure: Profits in Monopolistic Competition -(Figure: Profits in Monopolistic Competition)Use Figure: Profits in Monopolistic Competition.A negative economic profit (or economic loss)is earned if the profit-maximizing price is _ in panel _.

Firms in monopolistic competition can acquire some market power by:

(Figure: Possible Long-Run Outcome)Use Figure: Possible Long-Run Outcome.In the figure,which price and quantity refer to a potential long-run profit maximizing outcome for a firm producing in a monopolistically competitive market? Figure: Possible Long-Run Outcome

An industry with a single firm producing a product for which there are no close substitutes and that is protected by barriers to entry is an example of:

In large shopping malls,the retail clothing market is MOST illustrative of:

If a monopolistically competitive firm is producing the profit-maximizing level of output and is earning an economic profit in the short run:

The demand curve for a firm operating in a monopolistically competitive industry is:

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 (B)of the figure,the long-run equilibrium will result in:

Use the following to answer question: Figure: Monopolistic Competition VI -(Figure: Monopolistic Competition VI)Use Figure: Monopolistic Competition VI.The figure illustrates a firm in the ___;in the _,the demand and marginal revenue curves will shift to the ___.

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

Toby operates a small deli downtown.The deli industry is monopolistically competitive.Toby is producing the quantity that minimizes his average total cost.Assuming that Toby is maximizing profits,his:

Which characteristic is NOT indicative of monopolistic competition?

General Snacks is a typical firm in monopolistic competition.If the market is in long-run equilibrium,then the price General Snacks charges for its snack goods:

In the long run,monopolistically competitive firms tend to have:

A gas station operates in a monopolistically competitive market and is in short-run equilibrium.Suppose that a fixed cost for this firm decreases.As a result,the firm's price will ___,the firm's output will _,and the firm's economic profit will ___.

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

A wheat farmer is more likely to advertise than is a restaurant that sells fast food hamburgers.

Use the following to answer question: Figure: Profits in Monopolistic Competition -(Figure: Profits in Monopolistic Competition)Use Figure: Profits in Monopolistic Competition.A negative economic profit (or economic loss)is earned if the profit-maximizing price is _____ in panel _____.

Firms in monopolistic competition can acquire some market power by:

(Figure: Possible Long-Run Outcome)Use Figure: Possible Long-Run Outcome.In the figure,which price and quantity refer to a potential long-run profit maximizing outcome for a firm producing in a monopolistically competitive market? Figure: Possible Long-Run Outcome

An industry with a single firm producing a product for which there are no close substitutes and that is protected by barriers to entry is an example of:

In large shopping malls,the retail clothing market is MOST illustrative of:

If a monopolistically competitive firm is producing the profit-maximizing level of output and is earning an economic profit in the short run:

The demand curve for a firm operating in a monopolistically competitive industry is:

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 (B)of the figure,the long-run equilibrium will result in:

Use the following to answer question: Figure: Monopolistic Competition VI -(Figure: Monopolistic Competition VI)Use Figure: Monopolistic Competition VI.The figure illustrates a firm in the _____;in the _____,the demand and marginal revenue curves will shift to the _____.

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

Toby operates a small deli downtown.The deli industry is monopolistically competitive.Toby is producing the quantity that minimizes his average total cost.Assuming that Toby is maximizing profits,his:

Which characteristic is NOT indicative of monopolistic competition?

General Snacks is a typical firm in monopolistic competition.If the market is in long-run equilibrium,then the price General Snacks charges for its snack goods:

In the long run,monopolistically competitive firms tend to have:

A gas station operates in a monopolistically competitive market and is in short-run equilibrium.Suppose that a fixed cost for this firm decreases.As a result,the firm's price will _____,the firm's output will _____,and the firm's economic profit will _____.

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: Profits in Monopolistic Competition -(Figure: Profits in Monopolistic Competition)Use Figure: Profits in Monopolistic Competition.A negative economic profit (or economic loss)is earned if the profit-maximizing price is _ in panel _.

Use the following to answer question: Figure: Monopolistic Competition VI -(Figure: Monopolistic Competition VI)Use Figure: Monopolistic Competition VI.The figure illustrates a firm in the ___;in the _,the demand and marginal revenue curves will shift to the ___.

A gas station operates in a monopolistically competitive market and is in short-run equilibrium.Suppose that a fixed cost for this firm decreases.As a result,the firm's price will ___,the firm's output will _,and the firm's economic profit will ___.