Question 1

A firm's efficient scale is the quantity at which ________ is a minimum. A firm has excess capacity if it produces ________ its efficient scale.

Accepted Answer

A) average total cost;below 
B) marginal cost;above 
C) average total cost;above 
D) marginal cost;below 
E) average variable cost;below 
A) average total cost;below 
B) marginal cost;above 
C) average total cost;above 
D) marginal cost;below 
E) average variable cost;below

Question 2

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.If the firm produced the efficient quantity,it would produce

Accepted Answer

A) 100 units. 
B) 220 units. 
C) 200 units. 
D) 250 units. 
E) 140 units. 
A) 100 units. 
B) 220 units. 
C) 200 units. 
D) 250 units. 
E) 140 units.

Question 3

The real estate industry is monopolistically competitive,so in this industry

Accepted Answer

A) the market demand curve is a horizontal line. 
B) the market demand curve is upward sloping. 
C) there are few realtors in the market. 
D) excess capacity exists. 
E) excess capacity does not exist. 
A) the market demand curve is a horizontal line. 
B) the market demand curve is upward sloping. 
C) there are few realtors in the market. 
D) excess capacity exists. 
E) excess capacity does not exist.

Question 4

Use the information below to answer the following questions.
Fact 13.3.2
Suppose that Tommy Hilfiger's marginal cost of a jacket is $100 (a constant marginal cost)and at one of the firm's shops,total fixed cost is $2,000 a day.The profit-maximizing number of jackets sold in this shop is 20 a day.Then the shops nearby start to advertise their jackets.The Tommy Hilfiger shop now spends $2,000 a day advertising its jackets,and its profit-maximizing number of jackets sold jumps to 50 a day.
-Refer to Fact 13.3.2.Tommy Hilfiger uses advertising as a signal because

Accepted Answer

A) when Tommy Hilfiger advertises,it forces its competitors to advertise,which raises the competition's average total cost and increases the possibility of the competition incurring an economic loss and leaving the market. 
B) only firms that can afford advertising have longevity and will be able to honour any future obligations to its customers. 
C) by spending large sums of advertising Tommy Hilfiger is signalling that its jackets are high quality. 
D) advertising encourages people to spend regardless of the quality. 
E) advertising always increases demand and creates a more efficient market. 
A) when Tommy Hilfiger advertises,it forces its competitors to advertise,which raises the competition's average total cost and increases the possibility of the competition incurring an economic loss and leaving the market. 
B) only firms that can afford advertising have longevity and will be able to honour any future obligations to its customers. 
C) by spending large sums of advertising Tommy Hilfiger is signalling that its jackets are high quality. 
D) advertising encourages people to spend regardless of the quality. 
E) advertising always increases demand and creates a more efficient market.

Question 5

The four-firm concentration ratio is the percentage of the total ________ accounted for by the four largest firms in the industry.

Accepted Answer

A) profit 
B) sales 
C) cost 
D) capital 
E) investment 
A) profit 
B) sales 
C) cost 
D) capital 
E) investment

Question 6

Calvin is a custom picture framer.His total fixed cost is $110 a day,and his average variable cost is $1 a frame.He is maximizing his profit by selling 22 picture frames a day for $6 a frame.Few people know about Calvin's Framery.Calvin thinks that if he spends $10 a day on advertising,he can increase his market and sell 44 picture frames a day for $6 a frame.If Calvin's belief about the effect of advertising is correct,he

Accepted Answer

A) cannot increase his economic profit by advertising because advertising increases his average total cost. 
B) cannot increase his economic profit by advertising because advertising increases his total cost. 
C) can increase his economic profit by advertising. 
D) can increase his economic profit by advertising only if he raises the price of a picture frame. 
E) can increase his economic profit by advertising only if he can lower his total variable cost. 
A) cannot increase his economic profit by advertising because advertising increases his average total cost. 
B) cannot increase his economic profit by advertising because advertising increases his total cost. 
C) can increase his economic profit by advertising. 
D) can increase his economic profit by advertising only if he raises the price of a picture frame. 
E) can increase his economic profit by advertising only if he can lower his total variable cost.

Question 7

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 sells ________ jackets per day.

Accepted Answer

A) 200 
B) 240 
C) 275 
D) 140 
E) 280 
A) 200 
B) 240 
C) 275 
D) 140 
E) 280

Question 8

When firms in monopolistic competition make an economic profit,

Accepted Answer

A) firms enter the industry,which increases demand for the product of the firms originally in the market. 
B) firms exit the industry,and demand increases for the products of the firms that remain. 
C) firms exit the industry,and demand decreases for the firms that remain in the industry. 
D) firms enter the industry,and demand decreases for the firms that were originally in the industry. 
E) eventually the market will become a monopoly. 
A) firms enter the industry,which increases demand for the product of the firms originally in the market. 
B) firms exit the industry,and demand increases for the products of the firms that remain. 
C) firms exit the industry,and demand decreases for the firms that remain in the industry. 
D) firms enter the industry,and demand decreases for the firms that were originally in the industry. 
E) eventually the market will become a monopoly.

Question 9

Advertising costs in monopolistic competition increase a firm's

Accepted Answer

A) total fixed cost. 
B) marginal cost. 
C) total variable cost. 
D) average variable cost. 
E) marginal revenue. 
A) total fixed cost. 
B) marginal cost. 
C) total variable cost. 
D) average variable cost. 
E) marginal revenue.

Question 10

One factor that distinguishes a monopoly from monopolistic competition is that

Accepted Answer

A) firms in monopolistic competition practice collusion. 
B) no barriers to entry exist in a monopoly. 
C) barriers to exit exist in monopolistic competition. 
D) close substitutes are available in monopolistic competition. 
E) firms are price-takers in monopolistic competition. 
A) firms in monopolistic competition practice collusion. 
B) no barriers to entry exist in a monopoly. 
C) barriers to exit exist in monopolistic competition. 
D) close substitutes are available in monopolistic competition. 
E) firms are price-takers in monopolistic competition.

Question 11

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 D2.If this firm in monopolistic competition is maximizing economic profit,

Accepted Answer

A) there will be entry of rival firms into the industry. 
B) rival firms will exit the industry. 
C) it is producing the efficient quantity. 
D) the number of firms in the industry will remain constant. 
E) economic profit will fall over time. 
A) there will be entry of rival firms into the industry. 
B) rival firms will exit the industry. 
C) it is producing the efficient quantity. 
D) the number of firms in the industry will remain constant. 
E) economic profit will fall over time.

Question 12

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 D2.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) is not in a long-run equilibrium. 
E) is producing at its efficient scale. 
A) incurs an economic loss. 
B) makes zero economic profit. 
C) makes an economic profit. 
D) is not in a long-run equilibrium. 
E) is producing at its efficient scale.

Question 13

In long-run equilibrium,a firm in monopolistic competition

Accepted Answer

A) makes zero economic profit and operates with excess capacity. 
B) makes zero economic profit and produces above capacity output. 
C) makes a positive economic profit and operates with excess capacity. 
D) makes a positive economic profit and produces above capacity output. 
E) incurs an economic loss and exits the market. 
A) makes zero economic profit and operates with excess capacity. 
B) makes zero economic profit and produces above capacity output. 
C) makes a positive economic profit and operates with excess capacity. 
D) makes a positive economic profit and produces above capacity output. 
E) incurs an economic loss and exits the market.

Question 14

In a perfectly competitive market,the four-firm concentration ratio is

Accepted Answer

A) almost zero. 
B) 50 percent. 
C) 100 percent. 
D) 75 percent. 
E) 25 percent. 
A) almost zero. 
B) 50 percent. 
C) 100 percent. 
D) 75 percent. 
E) 25 percent.

Question 15

Monopolistic competition differs from monopoly because in monopolistic competition firms

Accepted Answer

A) maximize economic profit. 
B) set marginal revenue equal to marginal cost to maximize profit. 
C) are free to enter and exit. 
D) are price takers. 
E) make an economic profit in the long run. 
A) maximize economic profit. 
B) set marginal revenue equal to marginal cost to maximize profit. 
C) are free to enter and exit. 
D) are price takers. 
E) make an economic profit in the long run.

Question 16

Consider a monopolistically competitive industry which is in long-run equilibrium.Which of the following is true?

Accepted Answer

A) All firms charge a price equal to average total cost. 
B) All firms charge a price equal to marginal cost. 
C) All firms make an economic profit. 
D) The demand,average total cost,and marginal cost curves all intersect at the same point. 
E) Firms have an incentive to enter the industry. 
A) All firms charge a price equal to average total cost. 
B) All firms charge a price equal to marginal cost. 
C) All firms make an economic profit. 
D) The demand,average total cost,and marginal cost curves all intersect at the same point. 
E) Firms have an incentive to enter the industry.

A firm's efficient scale is the quantity at which is a minimum. A firm has excess capacity if it produces its efficient scale.

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.If the firm produced the efficient quantity,it would produce

The real estate industry is monopolistically competitive,so in this industry

The four-firm concentration ratio is the percentage of the total ________ accounted for by the four largest firms in the industry.

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 sells ________ jackets per day.

When firms in monopolistic competition make an economic profit,

Advertising costs in monopolistic competition increase a firm's

One factor that distinguishes a monopoly from monopolistic competition is that

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 D₂.If this firm in monopolistic competition is maximizing economic profit,

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 D₂.At the profit-maximizing output level,the firm

In long-run equilibrium,a firm in monopolistic competition

In a perfectly competitive market,the four-firm concentration ratio is

Monopolistic competition differs from monopoly because in monopolistic competition firms

Consider a monopolistically competitive industry which is in long-run equilibrium.Which of the following is true?

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

A firm's efficient scale is the quantity at which ________ is a minimum. A firm has excess capacity if it produces ________ its efficient scale.

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.If the firm produced the efficient quantity,it would produce

The real estate industry is monopolistically competitive,so in this industry

The four-firm concentration ratio is the percentage of the total ________ accounted for by the four largest firms in the industry.

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 sells ________ jackets per day.

When firms in monopolistic competition make an economic profit,

Advertising costs in monopolistic competition increase a firm's

One factor that distinguishes a monopoly from monopolistic competition is that

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 D2.If this firm in monopolistic competition is maximizing economic profit,

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 D2.At the profit-maximizing output level,the firm

In long-run equilibrium,a firm in monopolistic competition

In a perfectly competitive market,the four-firm concentration ratio is

Monopolistic competition differs from monopoly because in monopolistic competition firms

Consider a monopolistically competitive industry which is in long-run equilibrium.Which of the following is true?

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

A firm's efficient scale is the quantity at which is a minimum. A firm has excess capacity if it produces its efficient scale.

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.If the firm produced the efficient quantity,it would produce

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 D₂.If this firm in monopolistic competition is maximizing economic profit,

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 D₂.At the profit-maximizing output level,the firm