Question 1

-The above figure shows a firm in monopolistic competition. What is the profit maximizing level of output the firm will produce?

Accepted Answer

A)  4 units per day 
B)  8 units per day 
C)  10 units per day 
D)  16 units per day 
A)  4 units per day 
B)  8 units per day 
C)  10 units per day 
D)  16 units per day

Question 2

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

Accepted Answer

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

Question 3

In the long run, monopolistically competitive firms can make an economic profit because of product differentiation.

Accepted Answer

A) True 
 B)False

Question 4

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

Accepted Answer

A)  some customers will exit the market. 
B)  some workers will leave the industry's labor force. 
C)  some firms will leave the industry. 
D)  new firms will enter the industry. 
A)  some customers will exit the market. 
B)  some workers will leave the industry's labor force. 
C)  some firms will leave the industry. 
D)  new firms will enter the industry.

Question 5

Advertising by firms in monopolistic competition

Accepted Answer

A)  provides consumers with no useful information. 
B)  does not occur. 
C)  can persuade customers that product differentiation exists. 
D)  wastes resources because the entry of rivals forces firms to be price takers. 
A)  provides consumers with no useful information. 
B)  does not occur. 
C)  can persuade customers that product differentiation exists. 
D)  wastes resources because the entry of rivals forces firms to be price takers.

Question 6

In monopolistic competition, product improvement and development

Accepted Answer

A)  are valued by the consumer at an amount equal to the costs the producers have incurred. 
B)  yields a marginal benefit to the producer equal to price of the good. 
C)  is less than its efficient amount. 
D)  None of the above answers are correct. 
A)  are valued by the consumer at an amount equal to the costs the producers have incurred. 
B)  yields a marginal benefit to the producer equal to price of the good. 
C)  is less than its efficient amount. 
D)  None of the above answers are correct.

Question 7

Monopolistic competition is a market structure in which

Accepted Answer

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

Question 8

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 sells ________ jackets per day.

Accepted Answer

A)  100 
B)  64 
C)  129 
D)  133 
A)  100 
B)  64 
C)  129 
D)  133

Question 9

A monopolistically competitive firm has ________ power to set the price of its product because ________.

Accepted Answer

A)  no; there are no barriers to entry 
B)  some; there are barriers to entry 
C)  no; of product differentiation 
D)  some; of product differentiation 
A)  no; there are no barriers to entry 
B)  some; there are barriers to entry 
C)  no; of product differentiation 
D)  some; of product differentiation

Question 10

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 sells ________ jackets per day.

Accepted Answer

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

Question 11

-The above figure is for a firm in monopolistic competition. The diagram represents the short run rather than the long run because the

Accepted Answer

A)  MR curve cuts the ATC curve from below. 
B)  MR curve and the D curve do not coincide. 
C)  firm is incurring an economic loss. 
D)  firm is making an economic profit. 
A)  MR curve cuts the ATC curve from below. 
B)  MR curve and the D curve do not coincide. 
C)  firm is incurring an economic loss. 
D)  firm is making an economic profit.

Question 12

A characteristic of monopolistic competition is

Accepted Answer

A)  there is one firm in the industry. 
B)  each firm is a price taker. 
C)  each firm produces a differentiated product. 
D)  the actions of one firm affect the choices and actions of another firm. 
A)  there is one firm in the industry. 
B)  each firm is a price taker. 
C)  each firm produces a differentiated product. 
D)  the actions of one firm affect the choices and actions of another firm.

Question 13

In monopolistic competition, free entry and free exit mean that in the long run firms in the industry make zero economic profit.

Accepted Answer

A) True 
 B)False

Question 14

-In the above figure, the monopolistically competitive firm produces

Accepted Answer

A)  Q3 and sets the price at P3. 
B)  Q2 and sets the price at P2. 
C)  Q1 and sets the price at P1. 
D)  Q1 and sets the price at P5. 
A)  Q3 and sets the price at P3. 
B)  Q2 and sets the price at P2. 
C)  Q1 and sets the price at P1. 
D)  Q1 and sets the price at P5.

Question 15

One benefit of monopolistic competition over perfect competition is

Accepted Answer

A)  economic profit. 
B)  product variety. 
C)  excess capacity. 
D)  efficiency. 
A)  economic profit. 
B)  product variety. 
C)  excess capacity. 
D)  efficiency.

Question 16

A characteristic of monopolistic competition is

Accepted Answer

A)  product differentiation. 
B)  a high capital-output ratio. 
C)  a low ratio of fixed costs to variable costs. 
D)  the absence of advertising. 
A)  product differentiation. 
B)  a high capital-output ratio. 
C)  a low ratio of fixed costs to variable costs. 
D)  the absence of advertising.

Question 17

Explain why firms in monopolistic competition have excess capacity in the long run.

Accepted Answer

A firm's efficient scale of production i

Question 18

La Super Rica is a taco stand in Santa Barbara, California. It is popular with the locals and even the late Julia Child found the food delicious. If La Super Rica is making an economic profit, what is the probable outcome in the taco market?

Accepted Answer

A)  The number of firms will increase, decreasing La Super Rica's demand. 
B)  The number of firms will decrease, decreasing La Super Rica's demand. 
C)  The number of firms will increase, increasing La Super Rica's demand. 
D)  The number of firms will decrease, increasing La Super Rica's demand. 
A)  The number of firms will increase, decreasing La Super Rica's demand. 
B)  The number of firms will decrease, decreasing La Super Rica's demand. 
C)  The number of firms will increase, increasing La Super Rica's demand. 
D)  The number of firms will decrease, increasing La Super Rica's demand.

Question 19

-The figure above could represent the long-run equilibrium for a

Accepted Answer

A)  perfectly competitive firm. 
B)  monopolistically competitive firm. 
C)  monopoly. 
D)  firm facing inelastic demand at all outputs. 
A)  perfectly competitive firm. 
B)  monopolistically competitive firm. 
C)  monopoly. 
D)  firm facing inelastic demand at all outputs.

Question 20

In monopolistic competition, a firm can determine what price to set for its good because

Accepted Answer

A)  the demand for its good is not perfectly elastic. 
B)  the demand for its good is perfectly elastic. 
C)  there are many buyers. 
D)  there are many sellers. 
A)  the demand for its good is not perfectly elastic. 
B)  the demand for its good is perfectly elastic. 
C)  there are many buyers. 
D)  there are many sellers.

Exam 14: Monopolistic Competition

-The above figure shows a firm in monopolistic competition. What is the profit maximizing level of output the firm will produce?

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

In the long run, monopolistically competitive firms can make an economic profit because of product differentiation.

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

Advertising by firms in monopolistic competition

In monopolistic competition, product improvement and development

Monopolistic competition is a market structure in which

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 sells ________ jackets per day.

A monopolistically competitive firm has ________ power to set the price of its product because ________.

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 sells ________ jackets per day.

-The above figure is for a firm in monopolistic competition. The diagram represents the short run rather than the long run because the

A characteristic of monopolistic competition is

In monopolistic competition, free entry and free exit mean that in the long run firms in the industry make zero economic profit.

-In the above figure, the monopolistically competitive firm produces

One benefit of monopolistic competition over perfect competition is

A characteristic of monopolistic competition is

Explain why firms in monopolistic competition have excess capacity in the long run.

La Super Rica is a taco stand in Santa Barbara, California. It is popular with the locals and even the late Julia Child found the food delicious. If La Super Rica is making an economic profit, what is the probable outcome in the taco market?

-The figure above could represent the long-run equilibrium for a

In monopolistic competition, a firm can determine what price to set for its good because

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

A monopolistically competitive firm has power to set the price of its product because .