Question 1

Firms in monopolistic competition always will

Accepted Answer

A)  make an economic profit. 
B)  set their price equal to their marginal cost. 
C)  set their price above their marginal cost. 
D)  produce at the minimum average total cost. 
A)  make an economic profit. 
B)  set their price equal to their marginal cost. 
C)  set their price above their marginal cost. 
D)  produce at the minimum average total cost.

Question 2

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 maximizes its profit if it charges ________ per jacket.

Accepted Answer

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

Question 3

-The firm in the figure above is in monopolistic competition. The firm has

Accepted Answer

A)  no excess capacity. 
B)  excess capacity of 10 units. 
C)  excess capacity of 20 units. 
D)  excess capacity of 30 units. 
A)  no excess capacity. 
B)  excess capacity of 10 units. 
C)  excess capacity of 20 units. 
D)  excess capacity of 30 units.

Question 4

Product differentiation exists within an industry if

Accepted Answer

A)  there are no substitutes for a product. 
B)  there are close but not perfect substitutes for a product. 
C)  the firm can sell all it wants at the chosen price. 
D)  there is a monopoly. 
A)  there are no substitutes for a product. 
B)  there are close but not perfect substitutes for a product. 
C)  the firm can sell all it wants at the chosen price. 
D)  there is a monopoly.

Question 5

-The firm in the figure above is in monopolistic competition. It will set a price equal to

Accepted Answer

A)  $1. 
B)  $2. 
C)  $3. 
D)  more than $3. 
A)  $1. 
B)  $2. 
C)  $3. 
D)  more than $3.

Question 6

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)  There are barriers to entry. 
C)  Price exceeds average total cost. 
D)  Marginal revenue is less than marginal cost. 
A)  The firm's economic profit equals zero. 
B)  There are barriers to entry. 
C)  Price exceeds average total cost. 
D)  Marginal revenue is less than marginal cost.

Question 7

If firms in a monopolistically competitive industry are making an economic profit, then definitely there is

Accepted Answer

A)  a leftward shift in each firm's demand curve as new firms enter the market. 
B)  a rightward shift in each firm's marginal revenue curve as new firms enter the market. 
C)  an upward shift in each firm's cost curves as new firms enter the market. 
D)  All of the above answers are correct. 
A)  a leftward shift in each firm's demand curve as new firms enter the market. 
B)  a rightward shift in each firm's marginal revenue curve as new firms enter the market. 
C)  an upward shift in each firm's cost curves as new firms enter the market. 
D)  All of the above answers are correct.

Question 8

A monopolistically competitive firm will end up selling its output for a price such that

Accepted Answer

A)  price is greater than marginal cost. 
B)  price is equal to marginal cost. 
C)  price is equal to marginal revenue. 
D)  price is equal to average total cost. 
A)  price is greater than marginal cost. 
B)  price is equal to marginal cost. 
C)  price is equal to marginal revenue. 
D)  price is equal to average total cost.

Question 9

In monopolistically competitive industries,

Accepted Answer

A)  entry and exit push economic profits toward zero. 
B)  there is no diversity of products. 
C)  firms do not respond to changes in demand. 
D)  firms produce where marginal cost equals the marginal benefit to the consumers. 
A)  entry and exit push economic profits toward zero. 
B)  there is no diversity of products. 
C)  firms do not respond to changes in demand. 
D)  firms produce where marginal cost equals the marginal benefit to the consumers.

Question 10

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 only compete on product price. 
D)  Firms are free to enter or exit. 
A)  A small number of firms compete. 
B)  Each firm produces an identical product. 
C)  Firms only compete on product price. 
D)  Firms are free to enter or exit.

Question 11

If a monopolistically competitive firm's marginal cost curve shifts upward, then the amount of output it produces

Accepted Answer

A)  increases. 
B)  stays the same. 
C)  decreases. 
D)  could increase, decrease, or stay the same but more information is needed. 
A)  increases. 
B)  stays the same. 
C)  decreases. 
D)  could increase, decrease, or stay the same but more information is needed.

Question 12

-In the above figure, if the firm is in monopolistic competition, it will produce

Accepted Answer

A)  40 units. 
B)  60 units. 
C)  between 61 and 99 units. 
D)  100 units. 
A)  40 units. 
B)  60 units. 
C)  between 61 and 99 units. 
D)  100 units.

Question 13

-If all firms in a monopolistically competitive industry faced the same demand and cost curves pictured in the above figure,

Accepted Answer

A)  new firms will enter the industry. 
B)  some firms will exit the industry. 
C)  their economic profit would be zero. 
D)  they would each produce 60 units. 
A)  new firms will enter the industry. 
B)  some firms will exit the industry. 
C)  their economic profit would be zero. 
D)  they would each produce 60 units.

Question 14

-The above figure shows the demand and cost curves for a firm in monopolistic competition. In the figure, the firm makes an economic profit of

Accepted Answer

A)  $0. 
B)  $20. 
C)  $40. 
D)  $120. 
A)  $0. 
B)  $20. 
C)  $40. 
D)  $120.

Question 15

"It is clear from the theory of monopolistic competition that product development is not pushed to its efficient level." This statement is

Accepted Answer

A)  false because there is so much product differentiation in monopolistic competition. 
B)  true because there is little incentive to innovate in monopolistic competition. 
C)  false because there are so many wasteful innovations in monopolistic competition that are merely cosmetic. 
D)  true because price exceeds marginal revenue in monopolistic competition. 
A)  false because there is so much product differentiation in monopolistic competition. 
B)  true because there is little incentive to innovate in monopolistic competition. 
C)  false because there are so many wasteful innovations in monopolistic competition that are merely cosmetic. 
D)  true because price exceeds marginal revenue in monopolistic competition.

Question 16

Explain the role of advertising in monopolistic competition. Describe how advertising by all firms in a monopolistically competitive industry impacts a firm's ATC curve, its MC curve, its demand curve, and its MR curve.

Accepted Answer

In order to maintain (or regain) economi

Question 17

-The above figure shows the demand and cost curves for a firm in monopolistic competition. The firm earns total revenue of

Accepted Answer

A)  $120. 
B)  $40. 
C)  $160. 
D)  $0. 
A)  $120. 
B)  $40. 
C)  $160. 
D)  $0.

Question 18

The loss of efficiency that occurs in monopolistic competition has to be weighed against the gain of

Accepted Answer

A)  higher wages for employees. 
B)  an increase in employment. 
C)  greater product variety. 
D)  reduced environmental damage. 
A)  higher wages for employees. 
B)  an increase in employment. 
C)  greater product variety. 
D)  reduced environmental damage.

Question 19

How do the characteristics of perfect competition and monopolistic competition differ?

Accepted Answer

In monopolistic competition, the product

Question 20

A firm has excess capacity if its output is

Accepted Answer

A)  less than the quantity at which marginal cost is minimized. 
B)  less than the quantity at which economic profit is maximized. 
C)  less than the quantity at which average total cost is minimized. 
D)  more than the quantity at which average total cost is minimized. 
A)  less than the quantity at which marginal cost is minimized. 
B)  less than the quantity at which economic profit is maximized. 
C)  less than the quantity at which average total cost is minimized. 
D)  more than the quantity at which average total cost is minimized.

Exam 14: Monopolistic Competition

Firms in monopolistic competition always will

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 maximizes its profit if it charges ________ per jacket.

-The firm in the figure above is in monopolistic competition. The firm has

Product differentiation exists within an industry if

-The firm in the figure above is in monopolistic competition. It will set a price equal to

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

If firms in a monopolistically competitive industry are making an economic profit, then definitely there is

A monopolistically competitive firm will end up selling its output for a price such that

In monopolistically competitive industries,

Monopolistic competition is a market structure in which:

If a monopolistically competitive firm's marginal cost curve shifts upward, then the amount of output it produces

-In the above figure, if the firm is in monopolistic competition, it will produce

-If all firms in a monopolistically competitive industry faced the same demand and cost curves pictured in the above figure,

-The above figure shows the demand and cost curves for a firm in monopolistic competition. In the figure, the firm makes an economic profit of

"It is clear from the theory of monopolistic competition that product development is not pushed to its efficient level." This statement is

Explain the role of advertising in monopolistic competition. Describe how advertising by all firms in a monopolistically competitive industry impacts a firm's ATC curve, its MC curve, its demand curve, and its MR curve.

-The above figure shows the demand and cost curves for a firm in monopolistic competition. The firm earns total revenue of

The loss of efficiency that occurs in monopolistic competition has to be weighed against the gain of

How do the characteristics of perfect competition and monopolistic competition differ?

A firm has excess capacity if its output is

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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