Question 1

Which of the following is NOT a true statement about perfectly competitive and monopolistically competitive firms?

Accepted Answer

A)  Both monopolistically competitive and perfectly competitive firms have perfectly elastic demands. 
B)  In the long run, only monopolistically competitive firms have excess capacity. 
C)  Perfectly competitive firms produce at their efficient scale. 
D)  There are a large number of firms in both monopolistically competitive and perfectly competitive markets. 
A)  Both monopolistically competitive and perfectly competitive firms have perfectly elastic demands. 
B)  In the long run, only monopolistically competitive firms have excess capacity. 
C)  Perfectly competitive firms produce at their efficient scale. 
D)  There are a large number of firms in both monopolistically competitive and perfectly competitive markets.

Question 2

A monopolistically competitive firm is like a perfectly competitive firm insofar as

Accepted Answer

A)  both face perfectly elastic demand. 
B)  both earn an economic profit in the long run. 
C)  both have MR curves that lie below their demand curves. 
D)  neither is protected by high barriers to entry. 
A)  both face perfectly elastic demand. 
B)  both earn an economic profit in the long run. 
C)  both have MR curves that lie below their demand curves. 
D)  neither is protected by high barriers to entry.

Question 3

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 earn positive economic profit. 
D)  Demand, average total cost, and marginal cost all intersect. 
A)  All firms charge a price equal to average total cost. 
B)  All firms charge a price equal to marginal cost. 
C)  All firms earn positive economic profit. 
D)  Demand, average total cost, and marginal cost all intersect.

Question 4

Why are firms in monopolistic competition unable to make an economic profit in the long run?

Accepted Answer

While firms in monopolistic competition

Question 5

The figure shows the demand curve for Gap jackets (D), and Gap's marginal revenue curve (MR), marginal cost curve (MC), and average total cost curve (ATC).
-In the figure above, Gap's economic ________ is ________.

Accepted Answer

A)  loss; $8,000 
B)  loss; $13,000 
C)  profit; $7,200 
D)  profit; $13,000 
A)  loss; $8,000 
B)  loss; $13,000 
C)  profit; $7,200 
D)  profit; $13,000

Question 6

Monopolistic competition is a market structure in which

Accepted Answer

A)  a large number of firms compete. 
B)  each firm produces an identical product. 
C)  firms only compete on product price. 
D)  there are barriers to entry. 
A)  a large number of firms compete. 
B)  each firm produces an identical product. 
C)  firms only compete on product price. 
D)  there are barriers to entry.

Question 7

Product differentiation

Accepted Answer

A)  is why a monopolistic competitor faces a downward-sloping demand curve. 
B)  means that the monopolistic competitor's product is a close but not a perfect substitute for the products of its competitors. 
C)  enables the monopolistic competitor to compete in product quality. 
D)  All of the above answers are correct. 
A)  is why a monopolistic competitor faces a downward-sloping demand curve. 
B)  means that the monopolistic competitor's product is a close but not a perfect substitute for the products of its competitors. 
C)  enables the monopolistic competitor to compete in product quality. 
D)  All of the above answers are correct.

Question 8

A textbook publisher is in monopolistic competition. If the firm spends nothing on advertising, it can sell no books at $100 a book, but for each $10 cut in price, the quantity of books it can sell increases by 20 books a day. The firm's total fixed cost is $2,400 a day. Its average variable cost and marginal cost is a constant $20 per book. If the firm spends $1,200 a day on advertising, it can increase the quantity of books sold at each price by 50 percent. The firm will

Accepted Answer

A)  advertise because advertising will increase its economic profit. 
B)  not advertise because advertising will lower its economic profit. 
C)  advertise because advertising will decrease its economic loss. 
D)  not advertise because advertising will increase its economic loss. 
A)  advertise because advertising will increase its economic profit. 
B)  not advertise because advertising will lower its economic profit. 
C)  advertise because advertising will decrease its economic loss. 
D)  not advertise because advertising will increase its economic loss.

Question 9

-The figure above shows the cost, marginal revenue, and demand curves of Golden Chow, a producer of dog food. The market for dog food is monopolistic competition. In the long run as new firms enter, Golden Chow cuts its output to 200 cans per day. Its excess capacity is ________ cans per day.

Accepted Answer

A)  0 
B)  between 0 and 200 
C)  between 201 and 400 
D)  more than 401 
A)  0 
B)  between 0 and 200 
C)  between 201 and 400 
D)  more than 401

Question 10

Explain how selling costs in monopolistic competition affect the efficiency of monopolistic competition.

Accepted Answer

The additional selling costs from produc

Question 11

A monopolistically competitive firm can increase its economic profit by ________.

Accepted Answer

A)  developing new products 
B)  producing at the efficient quantity 
C)  eliminating excess capacity 
D)  advertising less 
A)  developing new products 
B)  producing at the efficient quantity 
C)  eliminating excess capacity 
D)  advertising less

Question 12

How do product development and marketing affect a firm in monopolistic competition?

Accepted Answer

Product development and marketing have t

Question 13

In monopolistic competition, product differentiation gives the firms the power to set their prices.

Accepted Answer

A) True 
 B)False

Question 14

Agave, Six Feet Under, Globe, Silk, Sotto Sotto and Zocalo are all restaurants in Atlanta. In the short run, Globe could experience I. economic profit.
II) zero economic profit.
III) economic loss.

Accepted Answer

A)  Only I 
B)  Only II 
C)  I, II, and III 
D)  Only I and II 
A)  Only I 
B)  Only II 
C)  I, II, and III 
D)  Only I and II

Question 15

Which of the following is FALSE regarding the long run for a firm in monopolistic competition?

Accepted Answer

A)  The firm's economic profit equals zero. 
B)  Marginal cost equals average total cost. 
C)  Price exceeds marginal cost. 
D)  Price equals average total cost. 
A)  The firm's economic profit equals zero. 
B)  Marginal cost equals average total cost. 
C)  Price exceeds marginal cost. 
D)  Price equals average total cost.

Question 16

The figure shows the demand curve for Gap jackets (D), and Gap's marginal revenue curve (MR), marginal cost curve (MC), and average total cost curve (ATC).
-In the figure above, what is Gap's excess capacity?

Accepted Answer

A)  32 jackets per day 
B)  zero 
C)  4 jackets per day 
D)  132 jackets per day 
A)  32 jackets per day 
B)  zero 
C)  4 jackets per day 
D)  132 jackets per day

Question 17

-The figure above shows the situation facing Smart Digit, Inc., a firm in monopolistic competition that produces calculators. The firm's markup is ________ per calculator.

Accepted Answer

A)  zero 
B)  $2 
C)  $4 
D)  $6 
A)  zero 
B)  $2 
C)  $4 
D)  $6

Question 18

Lee, J Brand, Joe's Jeans, Paper Denim & Cloth, Levi's, Wrangler, and many others are all producers of jeans. J Brand jeans sell for about $200 a pair. What would happen if J Brand priced their jeans at $220 per pair?

Accepted Answer

A)  They would sell fewer jeans because demand is elastic. 
B)  They would not sell any jeans. 
C)  They would sell more jeans. 
D)  They would sell fewer jeans because demand is perfectly elastic. 
A)  They would sell fewer jeans because demand is elastic. 
B)  They would not sell any jeans. 
C)  They would sell more jeans. 
D)  They would sell fewer jeans because demand is perfectly elastic.

Question 19

The decision to undertake product development in monopolistic competition is made by comparing the

Accepted Answer

A)  marginal benefit of product development to the marginal cost of product development. 
B)  average revenue of product development to the average total cost of product development. 
C)  total revenue of product development to the total cost of product development. 
D)  firm's expenditure on product development to expenditures by competing firms. 
A)  marginal benefit of product development to the marginal cost of product development. 
B)  average revenue of product development to the average total cost of product development. 
C)  total revenue of product development to the total cost of product development. 
D)  firm's expenditure on product development to expenditures by competing firms.

Question 20

-Fresh Taste, Inc. produces organic breakfast cereals. The market for breakfast cereals is monopolistically competitive. The figure above shows the demand curve that Fresh Taste faces (D), the company's marginal revenue curve (MR), its marginal cost curve (MC), and its average total cost curve (ATC). Fresh Taste produces ________ thousand boxes of cereals per day and sets a price of ________ a box.

Accepted Answer

A)  12; between $3.00 and $2.01 
B)  8; $1.00 
C)  8; $3.00 
D)  12; $2.00 
A)  12; between $3.00 and $2.01 
B)  8; $1.00 
C)  8; $3.00 
D)  12; $2.00

Exam 14: Monopolistic Competition

Which of the following is NOT a true statement about perfectly competitive and monopolistically competitive firms?

A monopolistically competitive firm is like a perfectly competitive firm insofar as

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

Why are firms in monopolistic competition unable to make an economic profit in the long run?

The figure shows the demand curve for Gap jackets (D), and Gap's marginal revenue curve (MR), marginal cost curve (MC), and average total cost curve (ATC). -In the figure above, Gap's economic ________ is ________.

Monopolistic competition is a market structure in which

Product differentiation

-The figure above shows the cost, marginal revenue, and demand curves of Golden Chow, a producer of dog food. The market for dog food is monopolistic competition. In the long run as new firms enter, Golden Chow cuts its output to 200 cans per day. Its excess capacity is ________ cans per day.

Explain how selling costs in monopolistic competition affect the efficiency of monopolistic competition.

A monopolistically competitive firm can increase its economic profit by ________.

How do product development and marketing affect a firm in monopolistic competition?

In monopolistic competition, product differentiation gives the firms the power to set their prices.

Agave, Six Feet Under, Globe, Silk, Sotto Sotto and Zocalo are all restaurants in Atlanta. In the short run, Globe could experience I. economic profit. II) zero economic profit. III) economic loss.

Which of the following is FALSE regarding the long run for a firm in monopolistic competition?

The figure shows the demand curve for Gap jackets (D), and Gap's marginal revenue curve (MR), marginal cost curve (MC), and average total cost curve (ATC). -In the figure above, what is Gap's excess capacity?

-The figure above shows the situation facing Smart Digit, Inc., a firm in monopolistic competition that produces calculators. The firm's markup is ________ per calculator.

Lee, J Brand, Joe's Jeans, Paper Denim & Cloth, Levi's, Wrangler, and many others are all producers of jeans. J Brand jeans sell for about $200 a pair. What would happen if J Brand priced their jeans at $220 per pair?

The decision to undertake product development in monopolistic competition is made by comparing the

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

Organizing Production

Output and Costs

Perfect Competition

Monopoly

Oligopoly

Public Choices and Public Goods

Externalities and the Environment

Markets for Factors of Production

Economic Inequality

Uncertainty and Information

Extension A: Review

Extension B: Review

Extension C: Review

Extension D: Review

Extension E: Review

Extension F: Review

Filters

The figure shows the demand curve for Gap jackets (D), and Gap's marginal revenue curve (MR), marginal cost curve (MC), and average total cost curve (ATC). -In the figure above, Gap's economic is .