Question 1

ACME, Inc. operates in a market structure in which there are many other firms that find it easy to enter or exit. ACME is operating in ________ market.

Accepted Answer

A)  definitely a perfectly competitive 
B)  either a perfectly competitive or a monopolistically competitive 
C)  definitely a monopolistically competitive 
D)  neither a perfectly competitive nor a monopolistically competitive 
A)  definitely a perfectly competitive 
B)  either a perfectly competitive or a monopolistically competitive 
C)  definitely a monopolistically competitive 
D)  neither a perfectly competitive nor a monopolistically competitive

Question 2

Why would a firm in a monopolistically competitive industry ever advertise?

Accepted Answer

Similar to virtually every other busines

Question 3

Which of the following statements regarding the long run for a profit-maximizing monopolistically competitive firm is FALSE?

Accepted Answer

A)  The firm is making zero economic profit. 
B)  The firm produces the quantity of output for which marginal revenue equals marginal cost. 
C)  The average total cost equals the price. 
D)  The firm produces the quantity at which the marginal revenue curve intersects the demand curve. 
A)  The firm is making zero economic profit. 
B)  The firm produces the quantity of output for which marginal revenue equals marginal cost. 
C)  The average total cost equals the price. 
D)  The firm produces the quantity at which the marginal revenue curve intersects the demand curve.

Question 4

Brand names are an example of

Accepted Answer

A)  economies of scale. 
B)  product differentiation. 
C)  oligopoly. 
D)  illegal barriers to entry. 
A)  economies of scale. 
B)  product differentiation. 
C)  oligopoly. 
D)  illegal barriers to entry.

Question 5

-In the above figure, the monopolistically competitive firm makes an economic profit of

Accepted Answer

A)  $0. 
B)  between $0 and $50 per day. 
C)  between $50.01 and $100 per day. 
D)  greater than $100.01 per day. 
A)  $0. 
B)  between $0 and $50 per day. 
C)  between $50.01 and $100 per day. 
D)  greater than $100.01 per day.

Question 6

Product differentiation is a defining characteristic of

Accepted Answer

A)  perfectly elastic demand. 
B)  oligopoly. 
C)  perfect competition. 
D)  monopolistic competition. 
A)  perfectly elastic demand. 
B)  oligopoly. 
C)  perfect competition. 
D)  monopolistic competition.

Question 7

In monopolistic competition, the presence of a large number of firms making a differentiated product means that

Accepted Answer

A)  each firm has some ability to effect the price of its particular good or service. 
B)  each firm must charge the same price. 
C)  the price is established by agreements among the different firms. 
D)  each firm must produce the same quantity. 
A)  each firm has some ability to effect the price of its particular good or service. 
B)  each firm must charge the same price. 
C)  the price is established by agreements among the different firms. 
D)  each firm must produce the same quantity.

Question 8

-In the figure above, assuming that the firm does not shut down, the firm will produce

Accepted Answer

A)  fewer than 19 units. 
B)  20 units. 
C)  30 units. 
D)  40 units. 
A)  fewer than 19 units. 
B)  20 units. 
C)  30 units. 
D)  40 units.

Question 9

-In the above figure of a monopolistically competitive firm, in the long run after all industry adjustments have taken place, assuming that this firm's costs have not changed the firm will

Accepted Answer

A)  produce more output at a higher price. 
B)  produce less output at a lower price. 
C)  produce the same quantity at the same price. 
D)  Any of the above are possible. 
A)  produce more output at a higher price. 
B)  produce less output at a lower price. 
C)  produce the same quantity at the same price. 
D)  Any of the above are possible.

Question 10

How is a monopolistically competitive firm similar to a perfectly competitive firm?

Accepted Answer

A)  Both will observe entry into the industry if economic profit is positive. 
B)  Both produce where average total cost equals marginal cost. 
C)  Both make a positive economic profit in the long run. 
D)  Both produce a homogeneous good. 
A)  Both will observe entry into the industry if economic profit is positive. 
B)  Both produce where average total cost equals marginal cost. 
C)  Both make a positive economic profit in the long run. 
D)  Both produce a homogeneous good.

Question 11

A monopolistically competitive industry has

Accepted Answer

A)  significant barriers to entry. 
B)  differentiated products. 
C)  mutually dependent firms. 
D)  a small number of large firms. 
A)  significant barriers to entry. 
B)  differentiated products. 
C)  mutually dependent firms. 
D)  a small number of large firms.

Question 12

-The figure above shows the situation facing Smart Digit, Inc., a firm in monopolistic competition that produces calculators. What is the firm's profit-maximizing price?

Accepted Answer

A)  $12 
B)  $10 
C)  $8 
D)  $4 
A)  $12 
B)  $10 
C)  $8 
D)  $4

Question 13

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. If the publisher advertises, its profit maximizing level of output is

Accepted Answer

A)  120 books per day. 
B)  80 books per day. 
C)  160 books per day. 
D)  100 books per day. 
A)  120 books per day. 
B)  80 books per day. 
C)  160 books per day. 
D)  100 books per day.

Question 14

What type of profit can a firm in monopolistic competition make in the long run? Explain your answer.

Accepted Answer

In the long run, a firm in monopolistic

Question 15

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

Accepted Answer

A)  The firm makes zero economic profit. 
B)  Price equals average total cost. 
C)  Output is not produced at minimum average total cost. 
D)  None of the above is a false statement. 
A)  The firm makes zero economic profit. 
B)  Price equals average total cost. 
C)  Output is not produced at minimum average total cost. 
D)  None of the above is a false statement.

Question 16

Which of the following is a characteristic of monopolistic competition?

Accepted Answer

A)  many firms 
B)  standardized product 
C)  mutual interdependence 
D)  barriers to entry 
A)  many firms 
B)  standardized product 
C)  mutual interdependence 
D)  barriers to entry

Question 17

When the monopolistically competitive firm shown in the above figure is at its long-run equilibrium, it will be

Accepted Answer

A)  producing the efficient scale of output and is at point A on the ATC curve. 
B)  producing more than the efficient scale of output and is at point C on the ATC curve. 
C)  producing at less than the efficient scale of output and is at a point such as F on the ATC curve. 
D)  producing the efficient scale of output and is at point B on the MC curve. 
A)  producing the efficient scale of output and is at point A on the ATC curve. 
B)  producing more than the efficient scale of output and is at point C on the ATC curve. 
C)  producing at less than the efficient scale of output and is at a point such as F on the ATC curve. 
D)  producing the efficient scale of output and is at point B on the MC curve.

Question 18

Firms in which type of market make zero economic profit in the long run?

Accepted Answer

A)  perfect competition and monopolistic competition 
B)  monopoly 
C)  perfect competition 
D)  monopolistic competition 
A)  perfect competition and monopolistic competition 
B)  monopoly 
C)  perfect competition 
D)  monopolistic competition

Question 19

Graphically we can illustrate a firm with price setting ability by drawing their demand curve ________.

Accepted Answer

A)  downward sloping 
B)  upward sloping 
C)  horizontal 
D)  vertical 
A)  downward sloping 
B)  upward sloping 
C)  horizontal 
D)  vertical

Question 20

-The above figure shows the demand and cost curves for a firm. The figure shows a

Accepted Answer

A)  monopolistically competitive firm in the long run. 
B)  perfectly competitive firm earning zero profit. 
C)  monopolistically competitive firm in the short run. 
D)  perfectly competitive firm in the short run. 
A)  monopolistically competitive firm in the long run. 
B)  perfectly competitive firm earning zero profit. 
C)  monopolistically competitive firm in the short run. 
D)  perfectly competitive firm in the short run.

Exam 14: Monopolistic Competition

ACME, Inc. operates in a market structure in which there are many other firms that find it easy to enter or exit. ACME is operating in ________ market.

Why would a firm in a monopolistically competitive industry ever advertise?

Which of the following statements regarding the long run for a profit-maximizing monopolistically competitive firm is FALSE?

Brand names are an example of

-In the above figure, the monopolistically competitive firm makes an economic profit of

Product differentiation is a defining characteristic of

In monopolistic competition, the presence of a large number of firms making a differentiated product means that

-In the figure above, assuming that the firm does not shut down, the firm will produce

-In the above figure of a monopolistically competitive firm, in the long run after all industry adjustments have taken place, assuming that this firm's costs have not changed the firm will

How is a monopolistically competitive firm similar to a perfectly competitive firm?

A monopolistically competitive industry has

-The figure above shows the situation facing Smart Digit, Inc., a firm in monopolistic competition that produces calculators. What is the firm's profit-maximizing price?

What type of profit can a firm in monopolistic competition make in the long run? Explain your answer.

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

Which of the following is a characteristic of monopolistic competition?

When the monopolistically competitive firm shown in the above figure is at its long-run equilibrium, it will be

Firms in which type of market make zero economic profit in the long run?

Graphically we can illustrate a firm with price setting ability by drawing their demand curve ________.

-The above figure shows the demand and cost curves for a firm. The figure shows a

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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