Question 1

Advertising costs are ________ costs and the per unit cost of advertising ________ as production increases.

Accepted Answer

A) fixed;increases 
B) variable;increases 
C) fixed;decreases 
D) variable;does not change 
E) variable;decreases 
A) fixed;increases 
B) variable;increases 
C) fixed;decreases 
D) variable;does not change 
E) variable;decreases

Question 2

In monopolistic competition,each firm supplies a ________ part of the total industry output and its actions ________ the actions of the other firms.

Accepted Answer

A) small;do not directly affect 
B) small;directly affect 
C) large;do not directly affect 
D) large;directly affect 
E) large;may or may not directly affect 
A) small;do not directly affect 
B) small;directly affect 
C) large;do not directly affect 
D) large;directly affect 
E) large;may or may not directly affect

Question 3

Use the figure below to answer the following questions.   Figure 13.2.1
-Refer to Figure 13.2.1.If this firm is in monopolistic competition,it charges a price of

Accepted Answer

A) $20 a unit. 
B) $50 a unit. 
C) $40 a unit. 
D) $30 a unit. 
E) $60 a unit. 
A) $20 a unit. 
B) $50 a unit. 
C) $40 a unit. 
D) $30 a unit. 
E) $60 a unit.

Question 4

Firms in monopolistic competition constantly develop new products in an effort to

Accepted Answer

A) increase the demand for their product. 
B) make the demand for their product unit elastic. 
C) increase the marginal cost of their product. 
D) decrease average total cost. 
E) decrease average fixed cost. 
A) increase the demand for their product. 
B) make the demand for their product unit elastic. 
C) increase the marginal cost of their product. 
D) decrease average total cost. 
E) decrease average fixed cost.

Question 5

Excess capacity in monopolistically competitive firms occurs because

Accepted Answer

A) each firm faces a demand that is perfectly elastic. 
B) each firm builds a huge plant. 
C) the existence of slightly differentiated products,serving almost the same purpose,causes a waste of precious natural resources. 
D) firms produce an output that is less than the output at minimum average total cost. 
E) marginal cost is too high. 
A) each firm faces a demand that is perfectly elastic. 
B) each firm builds a huge plant. 
C) the existence of slightly differentiated products,serving almost the same purpose,causes a waste of precious natural resources. 
D) firms produce an output that is less than the output at minimum average total cost. 
E) marginal cost is too high.

Question 6

Use the figure below to answer the following questions.   Figure 13.2.3
-Refer to Figure 13.2.3.Assume this firm faces demand curve D1.At the profit-maximizing output level,the firm

Accepted Answer

A) incurs an economic loss. 
B) makes zero economic profit. 
C) makes an economic profit. 
D) makes less economic profit than that earned by firms in perfect competition. 
E) makes an unknown economic profit that is impossible to determine without information concerning the price charged by the rival firms. 
A) incurs an economic loss. 
B) makes zero economic profit. 
C) makes an economic profit. 
D) makes less economic profit than that earned by firms in perfect competition. 
E) makes an unknown economic profit that is impossible to determine without information concerning the price charged by the rival firms.

Question 7

In the long-run,a firm in monopolistic competition produces at an output level where

Accepted Answer

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

Question 8

Which one of the following statements describes a market that is monopolistically competitive?

Accepted Answer

A) There are significant barriers to entry. 
B) The products produced by the firms are identical. 
C) Many firms compete by making similar but slightly different products. 
D) There is a small number of large firms. 
E) The product produced by one firm has no close substitutes. 
A) There are significant barriers to entry. 
B) The products produced by the firms are identical. 
C) Many firms compete by making similar but slightly different products. 
D) There is a small number of large firms. 
E) The product produced by one firm has no close substitutes.

Question 9

Use the figure below to answer the following questions.   Figure 13.2.6
-Refer to Figure 13.2.6,which shows the demand curve,marginal revenue curve and cost curves faced by Gap.Gap maximizes its economic profit if it charges ________ per jacket.

Accepted Answer

A) $100 
B) $95 
C) $75 
D) $120 
E) $90 
A) $100 
B) $95 
C) $75 
D) $120 
E) $90

Question 10

Which one of the following characteristics is not shared by single-price monopoly and monopolistic competition?

Accepted Answer

A) Firms face a downward-sloping demand curve. 
B) Profit-maximizing quantity occurs where MC = MR. 
C) Price charged is the highest consumers are willing to pay. 
D) Firms make an economic profit in the long run. 
E) The marginal revenue curve lies below the demand curve. 
A) Firms face a downward-sloping demand curve. 
B) Profit-maximizing quantity occurs where MC = MR. 
C) Price charged is the highest consumers are willing to pay. 
D) Firms make an economic profit in the long run. 
E) The marginal revenue curve lies below the demand curve.

Question 11

Use the figure below to answer the following questions.   Figure 13.2.1
-Refer to Figure 13.2.1.This firm in monopolistic competition will

Accepted Answer

A) make an economic profit in the short run. 
B) make zero economic profit in the short run. 
C) incur an economic loss. 
D) make an economic profit in the long run. 
E) incur an economic loss in the long run. 
A) make an economic profit in the short run. 
B) make zero economic profit in the short run. 
C) incur an economic loss. 
D) make an economic profit in the long run. 
E) incur an economic loss in the long run.

Question 12

Which of the following best explains why firms in monopolistic competition face a downward-sloping demand curve while perfectly competitive firms do not?

Accepted Answer

A) Monopolistically competitive industries have only a few firms. 
B) Monopolistically competitive firms face barriers to entry. 
C) Only industries with free entry and exit have firms that face horizontal demand curves. 
D) Firms in monopolistic competition are price takers. 
E) Firms in monopolistic competition sell differentiated goods. 
A) Monopolistically competitive industries have only a few firms. 
B) Monopolistically competitive firms face barriers to entry. 
C) Only industries with free entry and exit have firms that face horizontal demand curves. 
D) Firms in monopolistic competition are price takers. 
E) Firms in monopolistic competition sell differentiated goods.

Question 13

For a monopolistically competitive firm to be making an economic profit,

Accepted Answer

A) the production period must be the short run. 
B) the production period must be the long run. 
C) rival firms must not exist. 
D) its rivals must also be making an economic profit. 
E) barriers to entry must exist. 
A) the production period must be the short run. 
B) the production period must be the long run. 
C) rival firms must not exist. 
D) its rivals must also be making an economic profit. 
E) barriers to entry must exist.

Question 14

Which of the following statements regarding monopolistic competition is FALSE?

Accepted Answer

A) Resources are used efficiently when marginal social benefit equals marginal social cost. 
B) A greater degree of product variety creates a loss because the quantity produced is less than the efficient quantity. 
C) Monopolistic competition is definitely inefficient because price exceeds marginal cost. 
D) Compared to a situation with total product uniformity,monopolist competition might be efficient. 
E) A firm in monopolistic competition produces a quantity that is less than the efficient scale. 
A) Resources are used efficiently when marginal social benefit equals marginal social cost. 
B) A greater degree of product variety creates a loss because the quantity produced is less than the efficient quantity. 
C) Monopolistic competition is definitely inefficient because price exceeds marginal cost. 
D) Compared to a situation with total product uniformity,monopolist competition might be efficient. 
E) A firm in monopolistic competition produces a quantity that is less than the efficient scale.

Question 15

Toronto has a large number of retail stores that sell clothes.Each store has its own characteristics which differ from the other stores.The clothing business in Toronto is an example of

Accepted Answer

A) a duopoly. 
B) an oligopoly. 
C) a perfectly competitive market. 
D) a monopoly. 
E) a monopolistically competitive market. 
A) a duopoly. 
B) an oligopoly. 
C) a perfectly competitive market. 
D) a monopoly. 
E) a monopolistically competitive market.

Question 16

The correct ranking of the four basic market structures from low HHI (Herfindahl-Hirschman Index)to high HHI is

Accepted Answer

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

Question 17

Expenditures on advertising

Accepted Answer

A) can lower average total cost if the advertising increases the quantity sold by a large enough amount. 
B) cannot lower average total cost because when a firm advertises it increases its costs. 
C) always lower average total cost because whenever a firm advertises,it increases the quantity sold. 
D) are variable costs so do not affect the average total cost. 
E) lower total cost if the advertising increases the quantity sold by a large enough amount. 
A) can lower average total cost if the advertising increases the quantity sold by a large enough amount. 
B) cannot lower average total cost because when a firm advertises it increases its costs. 
C) always lower average total cost because whenever a firm advertises,it increases the quantity sold. 
D) are variable costs so do not affect the average total cost. 
E) lower total cost if the advertising increases the quantity sold by a large enough amount.

Question 18

In monopolistic competition,long-run economic profit is zero because of

Accepted Answer

A) product differentiation. 
B) no barriers to entry. 
C) excess capacity. 
D) economic inefficiency. 
E) the downward-sloping demand curve facing each firm. 
A) product differentiation. 
B) no barriers to entry. 
C) excess capacity. 
D) economic inefficiency. 
E) the downward-sloping demand curve facing each firm.

Question 19

In monopolistic competition,firms can make an economic profit in

Accepted Answer

A) the short run but not in the long run. 
B) the short run and in the long run. 
C) the long run but not in the short run. 
D) neither the short run nor the long run. 
E) always in the short run and sometimes but not frequently in the long run. 
A) the short run but not in the long run. 
B) the short run and in the long run. 
C) the long run but not in the short run. 
D) neither the short run nor the long run. 
E) always in the short run and sometimes but not frequently in the long run.

Question 20

In monopolistically competitive industries,

Accepted Answer

A) firms compete on quality,price and marketing. 
B) the range of choice of products is the same as in perfectly competitive industries. 
C) firms are insensitive to changes in consumer demand. 
D) all firms produce a quantity at which marginal cost is greater than marginal benefit. 
E) all firms make an economic profit. 
A) firms compete on quality,price and marketing. 
B) the range of choice of products is the same as in perfectly competitive industries. 
C) firms are insensitive to changes in consumer demand. 
D) all firms produce a quantity at which marginal cost is greater than marginal benefit. 
E) all firms make an economic profit.

Advertising costs are costs and the per unit cost of advertising as production increases.

In monopolistic competition,each firm supplies a part of the total industry output and its actions the actions of the other firms.

Use the figure below to answer the following questions. Figure 13.2.1 -Refer to Figure 13.2.1.If this firm is in monopolistic competition,it charges a price of

Firms in monopolistic competition constantly develop new products in an effort to

Excess capacity in monopolistically competitive firms occurs because

Use the figure below to answer the following questions. Figure 13.2.3 -Refer to Figure 13.2.3.Assume this firm faces demand curve D₁.At the profit-maximizing output level,the firm

In the long-run,a firm in monopolistic competition produces at an output level where

Which one of the following statements describes a market that is monopolistically competitive?

Use the figure below to answer the following questions. Figure 13.2.6 -Refer to Figure 13.2.6,which shows the demand curve,marginal revenue curve and cost curves faced by Gap.Gap maximizes its economic profit if it charges ________ per jacket.

Which one of the following characteristics is not shared by single-price monopoly and monopolistic competition?

Use the figure below to answer the following questions. Figure 13.2.1 -Refer to Figure 13.2.1.This firm in monopolistic competition will

Which of the following best explains why firms in monopolistic competition face a downward-sloping demand curve while perfectly competitive firms do not?

For a monopolistically competitive firm to be making an economic profit,

Which of the following statements regarding monopolistic competition is FALSE?

Toronto has a large number of retail stores that sell clothes.Each store has its own characteristics which differ from the other stores.The clothing business in Toronto is an example of

The correct ranking of the four basic market structures from low HHI (Herfindahl-Hirschman Index)to high HHI is

Expenditures on advertising

In monopolistic competition,long-run economic profit is zero because of

In monopolistic competition,firms can make an economic profit in

In monopolistically competitive industries,

What Is Economics

The Economic Problem

Demand and Supply

Elasticity

Efficiency and Equity

Government Actions in Markets

Global Markets in Action

Utility and Demand

Possibilities, preferences, and Choices

Output and Costs

Perfect Competition

Monopoly

Oligopoly

Externalities

Public Goods and Common Resources

Markets for Factors of Production

Economic Inequality

Filters

Exam 13: Monopolistic Competition

Advertising costs are ________ costs and the per unit cost of advertising ________ as production increases.

In monopolistic competition,each firm supplies a ________ part of the total industry output and its actions ________ the actions of the other firms.

Use the figure below to answer the following questions. Figure 13.2.1 -Refer to Figure 13.2.1.If this firm is in monopolistic competition,it charges a price of

Firms in monopolistic competition constantly develop new products in an effort to

Excess capacity in monopolistically competitive firms occurs because

Use the figure below to answer the following questions. Figure 13.2.3 -Refer to Figure 13.2.3.Assume this firm faces demand curve D1.At the profit-maximizing output level,the firm

In the long-run,a firm in monopolistic competition produces at an output level where

Which one of the following statements describes a market that is monopolistically competitive?

Use the figure below to answer the following questions. Figure 13.2.6 -Refer to Figure 13.2.6,which shows the demand curve,marginal revenue curve and cost curves faced by Gap.Gap maximizes its economic profit if it charges ________ per jacket.

Which one of the following characteristics is not shared by single-price monopoly and monopolistic competition?

Use the figure below to answer the following questions. Figure 13.2.1 -Refer to Figure 13.2.1.This firm in monopolistic competition will

Which of the following best explains why firms in monopolistic competition face a downward-sloping demand curve while perfectly competitive firms do not?

For a monopolistically competitive firm to be making an economic profit,

Which of the following statements regarding monopolistic competition is FALSE?

Toronto has a large number of retail stores that sell clothes.Each store has its own characteristics which differ from the other stores.The clothing business in Toronto is an example of

The correct ranking of the four basic market structures from low HHI (Herfindahl-Hirschman Index)to high HHI is

Expenditures on advertising

In monopolistic competition,long-run economic profit is zero because of

In monopolistic competition,firms can make an economic profit in

In monopolistically competitive industries,

What Is Economics

The Economic Problem

Demand and Supply

Elasticity

Efficiency and Equity

Government Actions in Markets

Global Markets in Action

Utility and Demand

Possibilities, preferences, and Choices

Output and Costs

Perfect Competition

Monopoly

Oligopoly

Externalities

Public Goods and Common Resources

Markets for Factors of Production

Economic Inequality

Filters

Advertising costs are costs and the per unit cost of advertising as production increases.

In monopolistic competition,each firm supplies a part of the total industry output and its actions the actions of the other firms.

Use the figure below to answer the following questions. Figure 13.2.3 -Refer to Figure 13.2.3.Assume this firm faces demand curve D₁.At the profit-maximizing output level,the firm