Question 1

Excess capacity is the

Accepted Answer

A)  difference between a perfectly competitive firm's and a monopolistically competitive firm's output. 
B)  difference between a perfectly competitive firm's and a monopoly's output. 
C)  output at the maximum point of the ATC curve. 
D)  None of the above answers is correct. 
A)  difference between a perfectly competitive firm's and a monopolistically competitive firm's output. 
B)  difference between a perfectly competitive firm's and a monopoly's output. 
C)  output at the maximum point of the ATC curve. 
D)  None of the above answers is correct.

Question 2

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

Accepted Answer

A)  have negatively sloping demand curves. 
B)  can make zero economic profit in the long run. 
C)  have horizontal MR curves. 
D)  are protected by high barriers to entry. 
A)  have negatively sloping demand curves. 
B)  can make zero economic profit in the long run. 
C)  have horizontal MR curves. 
D)  are protected by high barriers to entry.

Question 3

-The above figure shows the demand and cost curves for a firm in monopolistic competition in the long run. The firm maximizes its profit by

Accepted Answer

A)  producing 4 units and charging a price of $15. 
B)  producing 8 units and charging a price of $5. 
C)  producing 16 units and charging a price of $10. 
D)  None of the above answers is correct. 
A)  producing 4 units and charging a price of $15. 
B)  producing 8 units and charging a price of $5. 
C)  producing 16 units and charging a price of $10. 
D)  None of the above answers is correct.

Question 4

Which of the following is NOT true of firms in monopolistic competition?

Accepted Answer

A)  They are price takers. 
B)  They practice product differentiation. 
C)  They have excess capacity in the long run. 
D)  They earn a normal profit in the long run. 
A)  They are price takers. 
B)  They practice product differentiation. 
C)  They have excess capacity in the long run. 
D)  They earn a normal profit in the long run.

Question 5

In the long run, in monopolistic competition

Accepted Answer

A)  a firm's price equals its marginal cost. 
B)  firms make an economic profit. 
C)  firms make zero economic profit. 
D)  Both answers A and C are correct. 
A)  a firm's price equals its marginal cost. 
B)  firms make an economic profit. 
C)  firms make zero economic profit. 
D)  Both answers A and C are correct.

Question 6

In monopolistic competition:

Accepted Answer

A)  Each firm's price cannot deviate from the average price of other firms. 
B)  Each firm supplies a small part of the total market output. 
C)  One firm's actions directly affect the actions of the other firms. 
D)  Collusion is possible. 
A)  Each firm's price cannot deviate from the average price of other firms. 
B)  Each firm supplies a small part of the total market output. 
C)  One firm's actions directly affect the actions of the other firms. 
D)  Collusion is possible.

Question 7

In monopolistic competition, advertising costs

Accepted Answer

A)  are fixed costs. 
B)  can result in the firm producing an amount of output such that its average total costs are lower than if it did not advertise. 
C)  shift the ATC curve upward. 
D)  All of the above answers are correct. 
A)  are fixed costs. 
B)  can result in the firm producing an amount of output such that its average total costs are lower than if it did not advertise. 
C)  shift the ATC curve upward. 
D)  All of the above answers are correct.

Question 8

In monopolistic competition, in the long run firms produce

Accepted Answer

A)  less output than that which minimizes their ATC. 
B)  more output than that which minimizes their ATC. 
C)  the amount of output that minimizes their ATC and their AVC. 
D)  the amount of output that minimizes their ATC but not their AVC. 
A)  less output than that which minimizes their ATC. 
B)  more output than that which minimizes their ATC. 
C)  the amount of output that minimizes their ATC and their AVC. 
D)  the amount of output that minimizes their ATC but not their AVC.

Question 9

In monopolistically competitive industries,

Accepted Answer

A)  non-price competition through product differentiation is actively pursued by firms. 
B)  product variety is the same as in perfectly competitive industries. 
C)  firms do not respond to changes in consumer demand. 
D)  firms' economic profits are protected by barriers to entry. 
A)  non-price competition through product differentiation is actively pursued by firms. 
B)  product variety is the same as in perfectly competitive industries. 
C)  firms do not respond to changes in consumer demand. 
D)  firms' economic profits are protected by barriers to entry.

Question 10

-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's markup is

Accepted Answer

A)  more than zero but less than $1.00 
B)  $3.00 
C)  $2.00 
D)  zero. 
A)  more than zero but less than $1.00 
B)  $3.00 
C)  $2.00 
D)  zero.

Question 11

In the long run, a firm in a monopolistically competitive industry has its price equal to its

Accepted Answer

A)  average total cost. 
B)  marginal cost. 
C)  marginal revenue. 
D)  elasticity of demand. 
A)  average total cost. 
B)  marginal cost. 
C)  marginal revenue. 
D)  elasticity of demand.

Question 12

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

Accepted Answer

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

Question 13

In monopolistic competition, firms do not have to produce innovative products because they have downward-sloping demand curves.

Accepted Answer

A) True 
 B)False

Question 14

-The firm in the figure above is in monopolistic competition. It will produce

Accepted Answer

A)  10 units. 
B)  20 units. 
C)  30 units. 
D)  40 units. 
A)  10 units. 
B)  20 units. 
C)  30 units. 
D)  40 units.

Question 15

-The figure above shows Bill's Hotdogs, a monopolistically competitive firm. If other firms enter the market and have hot dogs that are very close substitutes for Bill's Hotdogs, then the demand curve for Bill's Hotdogs will ________.

Accepted Answer

A)  shift leftward and become more elastic 
B)  shift rightward and become more elastic 
C)  shift rightward and be parallel to the original demand curve 
D)  shift leftward and be parallel to the original demand curve 
A)  shift leftward and become more elastic 
B)  shift rightward and become more elastic 
C)  shift rightward and be parallel to the original demand curve 
D)  shift leftward and be parallel to the original demand curve

Question 16

Monopolistic competition is a market structure in which:

Accepted Answer

A)  A small number of firms compete. 
B)  Firms produce identical products. 
C)  Firms compete only on product price. 
D)  Firms are free to enter and exit the market. 
A)  A small number of firms compete. 
B)  Firms produce identical products. 
C)  Firms compete only on product price. 
D)  Firms are free to enter and exit the market.

Question 17

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

Accepted Answer

A)  The firm's price equals its marginal cost. 
B)  The firm's economic profit equals zero. 
C)  The firm's average total cost is minimized. 
D)  The firm's marginal cost equals its average total cost. 
A)  The firm's price equals its marginal cost. 
B)  The firm's economic profit equals zero. 
C)  The firm's average total cost is minimized. 
D)  The firm's marginal cost equals its average total cost.

Question 18

Which of the following statements regarding the efficiency of monopolistic competition is FALSE?

Accepted Answer

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

Question 19

-The above figure shows the demand and cost curves for a firm in monopolistic competition. The graph represents the firm's situation in

Accepted Answer

A)  only the short run. 
B)  only the long run. 
C)  either the short run or the long run. 
D)  neither the short run nor the long run. 
A)  only the short run. 
B)  only the long run. 
C)  either the short run or the long run. 
D)  neither the short run nor the long run.

Question 20

If a firm spends $600 on advertising, its

Accepted Answer

A)  ATC and MC curves shift upward. 
B)  MC curve shifts upward and its ATC curve does not shift. 
C)  ATC curve shifts upward and its MC curve does not shift. 
D)  ATC curve shifts upward and its MC curve shifts downward. 
A)  ATC and MC curves shift upward. 
B)  MC curve shifts upward and its ATC curve does not shift. 
C)  ATC curve shifts upward and its MC curve does not shift. 
D)  ATC curve shifts upward and its MC curve shifts downward.

Exam 14: Monopolistic Competition

Excess capacity is the

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

-The above figure shows the demand and cost curves for a firm in monopolistic competition in the long run. The firm maximizes its profit by

Which of the following is NOT true of firms in monopolistic competition?

In the long run, in monopolistic competition

In monopolistic competition:

In monopolistic competition, advertising costs

In monopolistic competition, in the long run firms produce

In monopolistically competitive industries,

In the long run, a firm in a monopolistically competitive industry has its price equal to its

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

In monopolistic competition, firms do not have to produce innovative products because they have downward-sloping demand curves.

-The firm in the figure above is in monopolistic competition. It will produce

-The figure above shows Bill's Hotdogs, a monopolistically competitive firm. If other firms enter the market and have hot dogs that are very close substitutes for Bill's Hotdogs, then the demand curve for Bill's Hotdogs will ________.

Monopolistic competition is a market structure in which:

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

Which of the following statements regarding the efficiency of monopolistic competition is FALSE?

-The above figure shows the demand and cost curves for a firm in monopolistic competition. The graph represents the firm's situation in

If a firm spends $600 on advertising, its

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

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