Question 1

Imperfectly competitive firms engage in nonprice competition.

Accepted Answer

A) True 
 B)False

Question 2

The main difference between perfect competition and monopolistic competition is

Accepted Answer

A) The degree of product differentiation. 
B) The long-run economic profits that are expected. 
C) The number of firms in the market. 
D) The ease of entry and exit. 
A) The degree of product differentiation. 
B) The long-run economic profits that are expected. 
C) The number of firms in the market. 
D) The ease of entry and exit.

Question 3

Which of the following characterizes monopolistic competition?

Accepted Answer

A) Many interdependent firms sell a homogeneous product. 
B) A few firms produce a particular type of product. 
C) Many firms produce a particular type of product,but each maintains some independent control over its own price. 
D) A few firms produce all of the market supply of a good. 
A) Many interdependent firms sell a homogeneous product. 
B) A few firms produce a particular type of product. 
C) Many firms produce a particular type of product,but each maintains some independent control over its own price. 
D) A few firms produce all of the market supply of a good.

Question 4

If new firms enter a monopolistically competitive market,the demand curves for the existing firms will shift to the

Accepted Answer

A) Left and become more price-inelastic. 
B) Left,and there will be no change in price elasticity. 
C) Left and become more price-elastic. 
D) Right,and there will be no change in price elasticity. 
A) Left and become more price-inelastic. 
B) Left,and there will be no change in price elasticity. 
C) Left and become more price-elastic. 
D) Right,and there will be no change in price elasticity.

Question 5

Refer to Figure 26.2 for a monopolistically competitive firm.At the profit-maximizing output and price,this firm is producing at an output level that achieves

Accepted Answer

A) Productive efficiency. 
B) Allocative efficiency. 
C) Maximum economies of scale. 
D) Neither productive nor allocative efficiency. 
A) Productive efficiency. 
B) Allocative efficiency. 
C) Maximum economies of scale. 
D) Neither productive nor allocative efficiency.

Question 6

Describe the characteristics of a monopolistically competitive industry.

Accepted Answer

Monopolistically competitive industries

Question 7

The monopolistically competitive firm earns zero economic profit in the long run.

Accepted Answer

A) True 
 B)False

Question 8

If a monopolistic competitor is maximizing profit,it is producing at a point where marginal cost

Accepted Answer

A) Is less than price. 
B) Equals price. 
C) Is greater than price. 
D) Equals average total cost. 
A) Is less than price. 
B) Equals price. 
C) Is greater than price. 
D) Equals average total cost.

Question 9

Refer to Figure 26.3 for a monopolistically competitive firm in the long run.Which of the following observations results in the problem of excess capacity?

Accepted Answer

A) The firm is producing less than the minimum-ATC output rate. 
B) The firm is producing at Q3 instead of where MR = MC. 
C) The firm is earning only zero economic profits in the long run. 
D) The firm is producing at Q1 instead of where MC = demand. 
A) The firm is producing less than the minimum-ATC output rate. 
B) The firm is producing at Q3 instead of where MR = MC. 
C) The firm is earning only zero economic profits in the long run. 
D) The firm is producing at Q1 instead of where MC = demand.

Question 10

Which of the following most characterizes monopolistic competition?

Accepted Answer

A) Price leadership. 
B) Product differentiation. 
C) Price discrimination. 
D) Economies of scale. 
A) Price leadership. 
B) Product differentiation. 
C) Price discrimination. 
D) Economies of scale.

Question 11

Describe why monopolistically competitive firms find it important to establish brand loyalty.

Accepted Answer

The extent of power a monopolistically c

Question 12

A monopolistically competitive industry is characterized by ________ concentration ratios and ________ entry barriers.

Accepted Answer

A) high;high 
B) high;low 
C) low;high 
D) low;low 
A) high;high 
B) high;low 
C) low;high 
D) low;low

Question 13

According to the article "What's Behind Starbucks' Price Hike?" in October 2006,Starbucks raised the price of its lattes,cappuccinos,drip coffee,and other drinks because of increases in wages and fuel costs.When it chose to hike prices,Starbucks was

Accepted Answer

A) Losing sales to its competitors and therefore needed higher prices to maintain revenue. 
B) Relying on the economy to improve in order to offset the loss in sales as a result of the price hikes. 
C) Relying on brand loyalty to prevent a significant loss in sales. 
D) Relying on very elastic demand. 
A) Losing sales to its competitors and therefore needed higher prices to maintain revenue. 
B) Relying on the economy to improve in order to offset the loss in sales as a result of the price hikes. 
C) Relying on brand loyalty to prevent a significant loss in sales. 
D) Relying on very elastic demand.

Question 14

Monopolistically competitive firms have a "monopoly" element to them because

Accepted Answer

A) There is only one seller. 
B) There are high barriers to entry. 
C) Brand loyalty gives them a captive audience. 
D) The cross-price elasticity is very high. 
A) There is only one seller. 
B) There are high barriers to entry. 
C) Brand loyalty gives them a captive audience. 
D) The cross-price elasticity is very high.

Question 15

Which of the following market structures will have higher prices in the long run than perfect competition,ceteris paribus?

Accepted Answer

A) Monopolistic competition and monopoly,but not oligopoly. 
B) Oligopoly and monopoly,but not monopolistic competition. 
C) Monopoly,but not oligopoly or monopolistic competition. 
D) Monopolistic competition,monopoly,and oligopoly. 
A) Monopolistic competition and monopoly,but not oligopoly. 
B) Oligopoly and monopoly,but not monopolistic competition. 
C) Monopoly,but not oligopoly or monopolistic competition. 
D) Monopolistic competition,monopoly,and oligopoly.

Question 16

A monopolistically competitive firm maximizes profits in the short run and long run at an output level where marginal revenue equals marginal costs.

Accepted Answer

A) True 
 B)False

Question 17

Refer to Figure 26.4 for a monopolistically competitive firm.In the long run this firm is most likely to face

Accepted Answer

A) Demand1 and MR1. 
B) Demand1 and MR2. 
C) Demand2 and MR2. 
D) A demand curve between Demand1 and Demand 2. 
A) Demand1 and MR1. 
B) Demand1 and MR2. 
C) Demand2 and MR2. 
D) A demand curve between Demand1 and Demand 2.

Question 18

Which of the following market structures will have lower output in the long run than perfect competition,ceteris paribus?

Accepted Answer

A) Monopolistic competition,but not oligopoly or monopoly. 
B) Monopolistic competition,oligopoly,and monopoly. 
C) Monopolistic competition and oligopoly,but not monopoly. 
D) Oligopoly and monopoly,but not monopolistic competition. 
A) Monopolistic competition,but not oligopoly or monopoly. 
B) Monopolistic competition,oligopoly,and monopoly. 
C) Monopolistic competition and oligopoly,but not monopoly. 
D) Oligopoly and monopoly,but not monopolistic competition.

Question 19

If new firms enter a monopolistically competitive market,the demand curves for the existing firms will

Accepted Answer

A) Shift to the left. 
B) Shift to the right. 
C) Remain unchanged. 
D) Remain unchanged,but the market demand curve will shift to the right. 
A) Shift to the left. 
B) Shift to the right. 
C) Remain unchanged. 
D) Remain unchanged,but the market demand curve will shift to the right.

Question 20

Monopolistically competitive firms are productively inefficient because long-run equilibrium occurs at an output rate where

Accepted Answer

A) MC is greater than MR. 
B) Price is greater than MC. 
C) ATC is greater than minimum ATC. 
D) Diseconomies of scale exist. 
A) MC is greater than MR. 
B) Price is greater than MC. 
C) ATC is greater than minimum ATC. 
D) Diseconomies of scale exist.

Exam 26: Monopolistic Competition

Imperfectly competitive firms engage in nonprice competition.

The main difference between perfect competition and monopolistic competition is

Which of the following characterizes monopolistic competition?

If new firms enter a monopolistically competitive market,the demand curves for the existing firms will shift to the

Refer to Figure 26.2 for a monopolistically competitive firm.At the profit-maximizing output and price,this firm is producing at an output level that achieves

Describe the characteristics of a monopolistically competitive industry.

The monopolistically competitive firm earns zero economic profit in the long run.

If a monopolistic competitor is maximizing profit,it is producing at a point where marginal cost

Refer to Figure 26.3 for a monopolistically competitive firm in the long run.Which of the following observations results in the problem of excess capacity?

Which of the following most characterizes monopolistic competition?

Describe why monopolistically competitive firms find it important to establish brand loyalty.

A monopolistically competitive industry is characterized by ________ concentration ratios and ________ entry barriers.

According to the article "What's Behind Starbucks' Price Hike?" in October 2006,Starbucks raised the price of its lattes,cappuccinos,drip coffee,and other drinks because of increases in wages and fuel costs.When it chose to hike prices,Starbucks was

Monopolistically competitive firms have a "monopoly" element to them because

Which of the following market structures will have higher prices in the long run than perfect competition,ceteris paribus?

A monopolistically competitive firm maximizes profits in the short run and long run at an output level where marginal revenue equals marginal costs.

Refer to Figure 26.4 for a monopolistically competitive firm.In the long run this firm is most likely to face

Which of the following market structures will have lower output in the long run than perfect competition,ceteris paribus?

If new firms enter a monopolistically competitive market,the demand curves for the existing firms will

Monopolistically competitive firms are productively inefficient because long-run equilibrium occurs at an output rate where

Economics: the Core Issues

The Useconomy: a Global View

Supply and Demand

The Role of Government

National Income Accounting

Unemployment

Inflation

The Business Cycle

Aggregate Demand

Self-Adjustment or Instability

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Monetary Policy

Supply-Side Policy: Short-Run Options

Growth and Productivity: Long-Run Possibilities

Theory Versus Reality

Consumer Choice

Elasticity

The Costs of Production

The Competitive Firm

Competitive Markets

Monopoly

Oligopoly

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A monopolistically competitive industry is characterized by concentration ratios and entry barriers.