Question 1

In monopolistic competition,if a firm makes modest changes in its price or output,it will influence the market shares of other firms in the market.

Accepted Answer

A) True 
 B)False

Question 2

A major difference between monopoly and monopolistic competition is

Accepted Answer

A) One maximizes profits by setting MR equal to MC,and the other does not. 
B) The number of firms in the market. 
C) One type of firm has market power,and the other does not. 
D) One has a downward-sloping demand curve,and the other does not. 
A) One maximizes profits by setting MR equal to MC,and the other does not. 
B) The number of firms in the market. 
C) One type of firm has market power,and the other does not. 
D) One has a downward-sloping demand curve,and the other does not.

Question 3

Monopolistic competition results in

Accepted Answer

A) Allocative efficiency. 
B) Production efficiency. 
C) The wrong mix of output. 
D) Marginal cost pricing. 
A) Allocative efficiency. 
B) Production efficiency. 
C) The wrong mix of output. 
D) Marginal cost pricing.

Question 4

In monopolistic competition,no buyer or seller has any control over the market price of a good.

Accepted Answer

A) True 
 B)False

Question 5

In monopolistic competition,the entry of new firms will cause all of the following to happen except

Accepted Answer

A) Long-run economic profits will be zero. 
B) The industry cost curves will shift to the left. 
C) The firm's demand curve will shift to the left. 
D) The industry marginal cost curve will shift to the right. 
A) Long-run economic profits will be zero. 
B) The industry cost curves will shift to the left. 
C) The firm's demand curve will shift to the left. 
D) The industry marginal cost curve will shift to the right.

Question 6

In monopolistic competition,a firm's demand curve is tangent to the ATC curve in the long run because

Accepted Answer

A) Barriers to entry are high. 
B) Entry eliminates economic profit,and exit eliminates losses. 
C) Advertising is ineffective in differentiating the product. 
D) Producers are price takers. 
A) Barriers to entry are high. 
B) Entry eliminates economic profit,and exit eliminates losses. 
C) Advertising is ineffective in differentiating the product. 
D) Producers are price takers.

Question 7

Brand loyalty usually makes the demand curve for a product

Accepted Answer

A) More price-elastic. 
B) Less price-elastic. 
C) Unitary elastic. 
D) More income-elastic. 
A) More price-elastic. 
B) Less price-elastic. 
C) Unitary elastic. 
D) More income-elastic.

Question 8

Refer to Figure 26.1 for a monopolistically competitive firm.The profit-maximizing output and price combination for this firm in the short run is

Accepted Answer

A) Q1,P1. 
B) Q2,P4. 
C) Q2,P1. 
D) Q4,P3. 
A) Q1,P1. 
B) Q2,P4. 
C) Q2,P1. 
D) Q4,P3.

Question 9

If there are many firms in an industry producing goods that are similar but slightly different,this is an example of

Accepted Answer

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

Question 10

Modest shifts of the market marginal cost curve will have no impact on the production decision of a monopolistically competitive firm.

Accepted Answer

A) True 
 B)False

Question 11

Refer to Figure 26.5.Which firm is producing the allocatively efficient level of output and is using the least amount of economic resources to produce each unit of output?

Accepted Answer

A) All of the firms. 
B) Firms B and D only. 
C) Firm B only. 
D) Firm D only. 
A) All of the firms. 
B) Firms B and D only. 
C) Firm B only. 
D) Firm D only.

Question 12

Refer to Figure 26.2 for a monopolistically competitive firm.At the profit-maximizing output and price,this firm is

Accepted Answer

A) Earning an economic profit. 
B) Earning an economic loss. 
C) Breaking even. 
D) Earning a monopoly profit. 
A) Earning an economic profit. 
B) Earning an economic loss. 
C) Breaking even. 
D) Earning a monopoly profit.

Question 13

Which type of firm engages in nonprice competition?

Accepted Answer

A) Monopolistically competitive firms. 
B) Perfectly competitive firms. 
C) Price takers. 
D) Extremely efficient firms. 
A) Monopolistically competitive firms. 
B) Perfectly competitive firms. 
C) Price takers. 
D) Extremely efficient firms.

Question 14

Marginal cost pricing means that

Accepted Answer

A) Goods are offered for sale at prices equal to average total cost. 
B) Firms produce where marginal cost equals marginal revenue. 
C) Firms produce where marginal cost equals zero. 
D) Goods are offered for sale at prices equal to marginal cost. 
A) Goods are offered for sale at prices equal to average total cost. 
B) Firms produce where marginal cost equals marginal revenue. 
C) Firms produce where marginal cost equals zero. 
D) Goods are offered for sale at prices equal to marginal cost.

Question 15

A monopolistically competitive firm can raise its price somewhat without fear of great change in unit sales because of

Accepted Answer

A) Brand loyalty. 
B) Economies of scale. 
C) Inelastic demand. 
D) Large market shares of firms in the market. 
A) Brand loyalty. 
B) Economies of scale. 
C) Inelastic demand. 
D) Large market shares of firms in the market.

Question 16

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 ________ economic profit,and ________ the market will occur.

Accepted Answer

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

Question 17

Compared to the outcome under a marginal cost pricing strategy,a monopolistically competitive firm will produce a

Accepted Answer

A) Lower output and charge a higher price. 
B) Greater output and charge a higher price. 
C) Lower output and charge a lower price. 
D) Greater output and charge a lower price. 
A) Lower output and charge a higher price. 
B) Greater output and charge a higher price. 
C) Lower output and charge a lower price. 
D) Greater output and charge a lower price.

Question 18

In 2016 Apple was the most valuable brand name.

Accepted Answer

A) True 
 B)False

Question 19

In monopolistic competition,a firm

Accepted Answer

A) Uses marginal cost pricing. 
B) Uses nonprice competition. 
C) Faces a horizontal demand curve. 
D) Has no market power. 
A) Uses marginal cost pricing. 
B) Uses nonprice competition. 
C) Faces a horizontal demand curve. 
D) Has no market power.

Question 20

If a monopolistically competitive firm raises its price,it will

Accepted Answer

A) Not lose any of its customers. 
B) Lose most of its customers. 
C) Lose some of its customers,but nowhere close to all its customers. 
D) Lose all of its customers. 
A) Not lose any of its customers. 
B) Lose most of its customers. 
C) Lose some of its customers,but nowhere close to all its customers. 
D) Lose all of its customers.

Exam 26: Monopolistic Competition

In monopolistic competition,if a firm makes modest changes in its price or output,it will influence the market shares of other firms in the market.

A major difference between monopoly and monopolistic competition is

Monopolistic competition results in

In monopolistic competition,no buyer or seller has any control over the market price of a good.

In monopolistic competition,the entry of new firms will cause all of the following to happen except

In monopolistic competition,a firm's demand curve is tangent to the ATC curve in the long run because

Brand loyalty usually makes the demand curve for a product

Refer to Figure 26.1 for a monopolistically competitive firm.The profit-maximizing output and price combination for this firm in the short run is

If there are many firms in an industry producing goods that are similar but slightly different,this is an example of

Modest shifts of the market marginal cost curve will have no impact on the production decision of a monopolistically competitive firm.

Refer to Figure 26.5.Which firm is producing the allocatively efficient level of output and is using the least amount of economic resources to produce each unit of output?

Refer to Figure 26.2 for a monopolistically competitive firm.At the profit-maximizing output and price,this firm is

Which type of firm engages in nonprice competition?

Marginal cost pricing means that

A monopolistically competitive firm can raise its price somewhat without fear of great change in unit sales because of

Compared to the outcome under a marginal cost pricing strategy,a monopolistically competitive firm will produce a

In 2016 Apple was the most valuable brand name.

In monopolistic competition,a firm

If a monopolistically competitive firm raises its price,it will

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

Fiscal Policy

Deficits and Debt

Money and Banks

The Federal Reserve System

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

Natural Monopolies: Deregulation

Environmental Protection

The Farm Problem

The Labor Market

Labor Unions

Financial Markets

Taxes: Equity Versus Efficiency

Transfer Payments: Welfare and Social Security

International Trade

International Finance

Global Poverty

Filters