Question 1

All of the following are examples of nonprice competition except

Accepted Answer

A) Differentiation of service. 
B) Advertising. 
C) Quality differences. 
D) Zero economic profit. 
A) Differentiation of service. 
B) Advertising. 
C) Quality differences. 
D) Zero economic profit.

Question 2

A major difference between oligopoly and monopolistic competition is that oligopolies do not

Accepted Answer

A) Have high concentration ratios. 
B) Have many competitors. 
C) Have high barriers to entry. 
D) Confront a downward-sloping demand curve. 
A) Have high concentration ratios. 
B) Have many competitors. 
C) Have high barriers to entry. 
D) Confront a downward-sloping demand curve.

Question 3

Monopolistic competition results in allocative

Accepted Answer

A) Inefficiency and productive efficiency. 
B) Inefficiency and productive inefficiency. 
C) Efficiency and productive efficiency. 
D) Efficiency and productive inefficiency. 
A) Inefficiency and productive efficiency. 
B) Inefficiency and productive inefficiency. 
C) Efficiency and productive efficiency. 
D) Efficiency and productive inefficiency.

Question 4

Which of the following market structures will have only normal profit in the long run?

Accepted Answer

A) Monopoly. 
B) Duopoly. 
C) Monopolistic competition. 
D) Oligopoly. 
A) Monopoly. 
B) Duopoly. 
C) Monopolistic competition. 
D) Oligopoly.

Question 5

A successful advertising campaign alters the demand curve and the supply curve facing the firm.

Accepted Answer

A) True 
 B)False

Question 6

Demand and Cost Data for Sylvie's Shampoo Company Table 26.2
A Monopolistically Competitive Firm
$$\begin{array} { | r | r | r | r | } 
\hline { \text { Price } } &{ \begin{array} { c } 
\text { Demand Data } \
\text { Quartity }
\end{array} } & \text { Cost Data Output } & { \text { Total Cost } } \
\hline \$ 22 & 6 & 6 & \$ 96 \
\hline \$ 20 & 7 & 7 & \$ 104 \
\hline \$ 18 & 8 & 8 & \$ 114 \
\hline \$ 16 & 9& 9 & \$ 126 \
\hline \$ 14 & 10 & 10 & \$ 140 \
\hline
\end{array}$$ Refer to Table 26.2.At the profit-maximizing output and price,Sylvie's Shampoo Company will earn a profit equal to

Accepted Answer

A) $36. 
B) $30. 
C) $140. 
D) $144. 
A) $36. 
B) $30. 
C) $140. 
D) $144.

Question 7

Demand and Cost Data for Sylvie's Shampoo Company Table 26.2
A Monopolistically Competitive Firm
$\begin{array}{|r|r|r|r|r|}
\hline&\text { Demand Data }&&\
\text { Price } & \text { Quantity } & \text { Cost Data Output } & \text { Total Cost } \
\hline \$ 11 & 6 & 6 & \$ 48 \
\hline \$ 10 & 7 & 7 & \$ 52 \
\hline\$9&8&8&\$57\
\hline \$ 8 & 9 & 9 & \$63 \
\hline  \$7 & 10& 10&\$70 \
\hline
\end{array}$
 Refer to Table 26.2.To maximize profit,Sylvie's Shampoo Company.should produce ________ bottles of shampoo and charge a price of ________ each.

Accepted Answer

A) 6;$22 
B) 7;$20 
C) 8;$18 
D) 9;$16 
A) 6;$22 
B) 7;$20 
C) 8;$18 
D) 9;$16

Question 8

Demand and Cost Data for Will's Beach Ball Company Table 26.1
A Monopolistically Competitive Firm
$\begin{array}{|r|r|r|r|r|}
\hline&\text { Demand Data }&&\
\text { Price } & \text { Quantity } & \text { Cost Data Output } & \text { Total Cost } \
\hline \$ 11 & 6 & 6 & \$ 48 \
\hline \$ 10 & 7 & 7 & \$ 52 \
\hline\$9&8&8&\$57\
\hline \$ 8 & 9 & 9 & \$63 \
\hline  \$7 & 10& 10&\$70 \
\hline
\end{array}$
 Refer to Table 26.1.At the profit-maximizing output and price,Will's Beach Ball Company will earn a ________ economic profit,and ________ the market will occur.

Accepted Answer

A) negative;exit from 
B) negative;entry into 
C) positive;exit from 
D) positive;entry into 
A) negative;exit from 
B) negative;entry into 
C) positive;exit from 
D) positive;entry into

Question 9

For which of the following market structures will the firm's demand curve be tangent to the ATC curve in the long run?

Accepted Answer

A) Duopoly. 
B) Monopolistic competition. 
C) Oligopoly. 
D) Monopoly. 
A) Duopoly. 
B) Monopolistic competition. 
C) Oligopoly. 
D) Monopoly.

Question 10

The combined market share for the top four firms in a monopolistically competitive industry will typically be in the range of 20 to 40 percent.

Accepted Answer

A) True 
 B)False

Question 11

A concentration ratio measures the

Accepted Answer

A) Proportion of industry output produced by all firms. 
B) Proportion of total industry output produced by the largest firms. 
C) Dollar value of total industry output produced by all firms. 
D) Dollar value of total industry output produced by the largest firms. 
A) Proportion of industry output produced by all firms. 
B) Proportion of total industry output produced by the largest firms. 
C) Dollar value of total industry output produced by all firms. 
D) Dollar value of total industry output produced by the largest firms.

Question 12

Brand loyalty

Accepted Answer

A) Makes the demand curve facing the firm more price-elastic. 
B) Leads to one price for all brands. 
C) Exists even when products are virtually identical. 
D) Is possible only when there are a few firms in the market. 
A) Makes the demand curve facing the firm more price-elastic. 
B) Leads to one price for all brands. 
C) Exists even when products are virtually identical. 
D) Is possible only when there are a few firms in the market.

Question 13

In monopolistic competition there is allocative inefficiency because

Accepted Answer

A) Price is greater than the minimum ATC. 
B) Production is not at the minimum ATC. 
C) Of excess capacity. 
D) Price is greater than MC. 
A) Price is greater than the minimum ATC. 
B) Production is not at the minimum ATC. 
C) Of excess capacity. 
D) Price is greater than MC.

Question 14

Refer to Figure 26.4 for a monopolistically competitive firm.If the firm currently faces Demand1 and MR1,then it will earn

Accepted Answer

A) A positive economic profit,and firms will enter the industry. 
B) A negative economic profit,and firms will enter the industry. 
C) A negative economic profit,and firms will exit the industry. 
D) Zero economic profit,and neither entry nor exit will occur. 
A) A positive economic profit,and firms will enter the industry. 
B) A negative economic profit,and firms will enter the industry. 
C) A negative economic profit,and firms will exit the industry. 
D) Zero economic profit,and neither entry nor exit will occur.

Question 15

An In the News article titled "Selling "Pure Water": A $Billion Scam?" refers to the use of advertising.When a firm successfully advertises its product,the firm

Accepted Answer

A) Has more control over its price. 
B) Has less control over its price. 
C) Still has no control over its price because all firms are price takers. 
D) Has total control over its price. 
A) Has more control over its price. 
B) Has less control over its price. 
C) Still has no control over its price because all firms are price takers. 
D) Has total control over its price.

Question 16

An In the News article titled "Selling "Pure Water": A $Billion Scam?" refers to the use of advertising.When a firm successfully advertises its product,the price elasticity of demand becomes

Accepted Answer

A) More elastic. 
B) Less elastic. 
C) More efficient. 
D) Less efficient. 
A) More elastic. 
B) Less elastic. 
C) More efficient. 
D) Less efficient.

Question 17

Firms in a monopolistically competitive market make independent production decisions.

Accepted Answer

A) True 
 B)False

Question 18

As new firms enter a monopolistically competitive industry,the demand curve for an individual firm shifts to the right.

Accepted Answer

A) True 
 B)False

Question 19

In monopolistically competitive markets,product differentiation is a significant barrier to entry.

Accepted Answer

A) True 
 B)False

Question 20

The kinked oligopoly demand curve does not describe the demand curve for monopolistic competition because in monopolistically competitive markets,

Accepted Answer

A) Firms are not as interdependent as oligopolistic firms. 
B) Firms have no market power. 
C) There is not as much product differentiation as in oligopoly. 
D) There is no nonprice competition. 
A) Firms are not as interdependent as oligopolistic firms. 
B) Firms have no market power. 
C) There is not as much product differentiation as in oligopoly. 
D) There is no nonprice competition.

Exam 26: Monopolistic Competition

All of the following are examples of nonprice competition except

A major difference between oligopoly and monopolistic competition is that oligopolies do not

Monopolistic competition results in allocative

Which of the following market structures will have only normal profit in the long run?

A successful advertising campaign alters the demand curve and the supply curve facing the firm.

For which of the following market structures will the firm's demand curve be tangent to the ATC curve in the long run?

The combined market share for the top four firms in a monopolistically competitive industry will typically be in the range of 20 to 40 percent.

A concentration ratio measures the

Brand loyalty

In monopolistic competition there is allocative inefficiency because

Refer to Figure 26.4 for a monopolistically competitive firm.If the firm currently faces Demand1 and MR1,then it will earn

An In the News article titled "Selling "Pure Water": A $Billion Scam?" refers to the use of advertising.When a firm successfully advertises its product,the firm

An In the News article titled "Selling "Pure Water": A $Billion Scam?" refers to the use of advertising.When a firm successfully advertises its product,the price elasticity of demand becomes

Firms in a monopolistically competitive market make independent production decisions.

As new firms enter a monopolistically competitive industry,the demand curve for an individual firm shifts to the right.

In monopolistically competitive markets,product differentiation is a significant barrier to entry.

The kinked oligopoly demand curve does not describe the demand curve for monopolistic competition because in monopolistically competitive markets,

Economics: the Core Issues

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Refer to Figure 26.4 for a monopolistically competitive firm.If the firm currently faces Demand₁ and MR₁,then it will earn