Question 1

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

Accepted Answer

A)  The firm's economic profit equals zero. 
B)  Marginal revenue equals marginal cost. 
C)  Price exceeds marginal cost. 
D)  All of the above are true. 
A)  The firm's economic profit equals zero. 
B)  Marginal revenue equals marginal cost. 
C)  Price exceeds marginal cost. 
D)  All of the above are true.

Question 2

If an industry lacks barriers to entry and each of the many firm faces a demand curve with a negative slope, the industry is

Accepted Answer

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

Question 3

In monopolistic competition

Accepted Answer

A)  firms face barriers to entry. 
B)  a large number of firms compete. 
C)  firms produce and sell an identical product. 
D)  firms face perfectly elastic demand for their product. 
A)  firms face barriers to entry. 
B)  a large number of firms compete. 
C)  firms produce and sell an identical product. 
D)  firms face perfectly elastic demand for their product.

Question 4

Which of the following statements regarding a profit-maximizing monopolistically competitive firm is NOT true?

Accepted Answer

A)  The MR curve lies below the demand curve. 
B)  A firm produces the quantity at which the MR curve intersects the MC curve. 
C)  The MC curve intersects the ATC curve at the ATC curve's lowest point. 
D)  A firm's price equals the price at which the MR curve intersects the MC curve. 
A)  The MR curve lies below the demand curve. 
B)  A firm produces the quantity at which the MR curve intersects the MC curve. 
C)  The MC curve intersects the ATC curve at the ATC curve's lowest point. 
D)  A firm's price equals the price at which the MR curve intersects the MC curve.

Question 5

In monopolistic competition, the demand curve for a firm's product is negatively sloped because of

Accepted Answer

A)  barriers to entry. 
B)  no barriers to entry. 
C)  product differentiation. 
D)  economies of scale. 
A)  barriers to entry. 
B)  no barriers to entry. 
C)  product differentiation. 
D)  economies of scale.

Question 6

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

Accepted Answer

A)  producing 8 units and charging a price of $5. 
B)  producing 8 units and charging a price of $15. 
C)  producing 16 units and charging a price of $10. 
D)  producing 20 units and charging a price of $25. 
A)  producing 8 units and charging a price of $5. 
B)  producing 8 units and charging a price of $15. 
C)  producing 16 units and charging a price of $10. 
D)  producing 20 units and charging a price of $25.

Question 7

Selling costs, such as advertising, are likely to be a large share of total cost in an industry that is

Accepted Answer

A)  perfectly competitive. 
B)  monopolistically competitive. 
C)  a monopoly. 
D)  non-profit. 
A)  perfectly competitive. 
B)  monopolistically competitive. 
C)  a monopoly. 
D)  non-profit.

Question 8

Which of the following is NOT a characteristic of monopolistic competition?

Accepted Answer

A)  many firms 
B)  price taking firms 
C)  advertising 
D)  product differentiation 
A)  many firms 
B)  price taking firms 
C)  advertising 
D)  product differentiation

Question 9

A positive markup is earned by a firm if

Accepted Answer

A)  its price exceeds its marginal cost. 
B)  marginal revenue equals marginal cost. 
C)  price equals marginal cost. 
D)  price equals average total cost. 
A)  its price exceeds its marginal cost. 
B)  marginal revenue equals marginal cost. 
C)  price equals marginal cost. 
D)  price equals average total cost.

Question 10

The figure shows the demand curve for Nike shoes (D), and Nike's marginal revenue curve (MR), marginal cost curve (MC), and average total cost curve (ATC).
-In the figure above, Nike maximizes its profit if it charges ________ per pair of shoes.

Accepted Answer

A)  $75 
B)  $60 
C)  $72 
D)  $42 
A)  $75 
B)  $60 
C)  $72 
D)  $42

Question 11

Shower Power, Inc., a firm in monopolistic competition, produces shower radios. The company's economists know that it can sell no radios at $80, and for each $10 cut in price, the quantity of radios it can sell increases by 50 a day. This relationship continues to hold until the price falls to $20. The firm's total fixed cost is $3,000 a day. Its marginal cost is constant at $20 per radio. Shower Power's managers are considering some quality improvements in their shower radios, which would raise the firm's total fixed cost by $200 per day and double its marginal cost. Shower Power's economists report that if the firm undertakes these quality improvements, from the demand relationship given above Shower Power will be able to increase the quantity of radios sold by 20 percent at each price.
a) Draw the new demand curve faced by the firm and its new marginal revenue curve. Draw Shower Power's new marginal cost and new average total cost curves.
b) With no quality improvements, what quantity of radios maximizes Shower Power's profit? What is the profit-maximizing price? What is the firm's economic profit?
c) If Shower Power undertakes the quality improvements, what quantity of radios should it sell to maximize its profit? What is the profit-maximizing price? What is its economic profit?
d) Should Shower Power implement the quality improvements? Why or why not?

Accepted Answer

@#IMG-DLM& a) The figure above shows Shower Power'

Question 12

Monopolistic competition is a market structure in which

Accepted Answer

A)  a small number of firms compete. 
B)  each firm produces an identical product. 
C)  firms compete on product quality, price, and marketing. 
D)  there are barriers to entry. 
A)  a small number of firms compete. 
B)  each firm produces an identical product. 
C)  firms compete on product quality, price, and marketing. 
D)  there are barriers to entry.

Question 13

-The above figure shows a monopolistically competitive firm. The figure

Accepted Answer

A)  is only a short-run illustration because the firm is making an economic profit. 
B)  could be either a short-run or long-run illustration because monopolistically competitive firms can make an economic profit in the long-run. 
C)  is only a long-run illustration because the firm is making zero economic profit. 
D)  is neither a short- nor a long-run illustration. 
A)  is only a short-run illustration because the firm is making an economic profit. 
B)  could be either a short-run or long-run illustration because monopolistically competitive firms can make an economic profit in the long-run. 
C)  is only a long-run illustration because the firm is making zero economic profit. 
D)  is neither a short- nor a long-run illustration.

Question 14

-In the figure above, the firm's economic

Accepted Answer

A)  loss will be greater than $30 per day. 
B)  loss will be $30 or less per day. 
C)  profit will be between $0 and $30 per day. 
D)  profit will be greater than $30.01 per day. 
A)  loss will be greater than $30 per day. 
B)  loss will be $30 or less per day. 
C)  profit will be between $0 and $30 per day. 
D)  profit will be greater than $30.01 per day.

Question 15

Product development is efficient if the

Accepted Answer

A)  new product actually brings great benefits to the consumer. 
B)  producer's marginal cost of product development equals the consumer's marginal benefit. 
C)  producer surplus from selling the product equals the consumer surplus. 
D)  average cost of the product development equals the average revenue generated. 
A)  new product actually brings great benefits to the consumer. 
B)  producer's marginal cost of product development equals the consumer's marginal benefit. 
C)  producer surplus from selling the product equals the consumer surplus. 
D)  average cost of the product development equals the average revenue generated.

Question 16

-The above figure shows the demand and cost curves for a monopolistically competitive firm in the long run. The maximum economic profit this firm can earn equal equals

Accepted Answer

A)  $0. 
B)  $80. 
C)  $120. 
D)  $160. 
A)  $0. 
B)  $80. 
C)  $120. 
D)  $160.

Question 17

In monopolistic competition, when firms make an economic profit,

Accepted Answer

A)  the existing firms continue to make an economic profit in the long run because of product differentiation. 
B)  new firms enter the industry so that the price falls and the economic profit eventually falls to zero. 
C)  new firms enter the industry so that output decreases and the economic profit increases. 
D)  new firms enter the industry so that output increases and the economic profit increases. 
A)  the existing firms continue to make an economic profit in the long run because of product differentiation. 
B)  new firms enter the industry so that the price falls and the economic profit eventually falls to zero. 
C)  new firms enter the industry so that output decreases and the economic profit increases. 
D)  new firms enter the industry so that output increases and the economic profit increases.

Question 18

Lee, J Brand, Joe's Jeans, Paper Denim & Cloth, Levi's, Wrangler, and many others are all producers of jeans. In what type of market does Lee operate?

Accepted Answer

A)  Monopolistic Competition 
B)  Monopoly 
C)  Oligopoly 
D)  Perfect Competition 
A)  Monopolistic Competition 
B)  Monopoly 
C)  Oligopoly 
D)  Perfect Competition

Question 19

Which of the following is NOT true of monopolistic competition?

Accepted Answer

A)  Firms produce a good that is a perfect substitute for their competitors' goods. 
B)  There is free entry and exit. 
C)  There are a large number of firms. 
D)  Firms can compete on price and quality. 
A)  Firms produce a good that is a perfect substitute for their competitors' goods. 
B)  There is free entry and exit. 
C)  There are a large number of firms. 
D)  Firms can compete on price and quality.

Question 20

In monopolistic competition, in the short run a firm maximizes its profit by selecting an output at which marginal cost equals

Accepted Answer

A)  average total cost. 
B)  marginal revenue. 
C)  price. 
D)  zero. 
A)  average total cost. 
B)  marginal revenue. 
C)  price. 
D)  zero.

Exam 14: Monopolistic Competition

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

If an industry lacks barriers to entry and each of the many firm faces a demand curve with a negative slope, the industry is

In monopolistic competition

Which of the following statements regarding a profit-maximizing monopolistically competitive firm is NOT true?

In monopolistic competition, the demand curve for a firm's product is negatively sloped because of

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

Selling costs, such as advertising, are likely to be a large share of total cost in an industry that is

Which of the following is NOT a characteristic of monopolistic competition?

A positive markup is earned by a firm if

The figure shows the demand curve for Nike shoes (D), and Nike's marginal revenue curve (MR), marginal cost curve (MC), and average total cost curve (ATC). -In the figure above, Nike maximizes its profit if it charges ________ per pair of shoes.

Monopolistic competition is a market structure in which

-The above figure shows a monopolistically competitive firm. The figure

-In the figure above, the firm's economic

Product development is efficient if the

-The above figure shows the demand and cost curves for a monopolistically competitive firm in the long run. The maximum economic profit this firm can earn equal equals

In monopolistic competition, when firms make an economic profit,

Lee, J Brand, Joe's Jeans, Paper Denim & Cloth, Levi's, Wrangler, and many others are all producers of jeans. In what type of market does Lee operate?

Which of the following is NOT true of monopolistic competition?

In monopolistic competition, in the short run a firm maximizes its profit by selecting an output at which marginal cost equals

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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