Question 1

To maximize profit, a ________ firm will produce where marginal revenue equals marginal cost.

Accepted Answer

A)  monopolistically competitive 
B)  perfectly competitive 
C)  monopolistic 
D)  All of the above are correct. 
A)  monopolistically competitive 
B)  perfectly competitive 
C)  monopolistic 
D)  All of the above are correct.

Question 2

The Do It Yourself Hardware Store is a monopolistically competitive firm. Its marginal revenue curve

Accepted Answer

A)  is identical to its demand curve. 
B)  lies below its demand curve intersecting the quantity axis at the same point at which the demand curve intersects it. 
C)  lies below its demand curve intersecting the quantity axis midway between the origin and the point at which the demand curve intersects it. 
D)  is below its demand curve if demand is elastic and above the demand curve if demand is inelastic. 
A)  is identical to its demand curve. 
B)  lies below its demand curve intersecting the quantity axis at the same point at which the demand curve intersects it. 
C)  lies below its demand curve intersecting the quantity axis midway between the origin and the point at which the demand curve intersects it. 
D)  is below its demand curve if demand is elastic and above the demand curve if demand is inelastic.

Question 3

Refer to the information provided in Figure 15.1 below to answer the question(s) that follow. Below are cost curves for Dom's Barber Shop, a monopolistically competitive firm.   Figure 15.1
-Refer to Figure 15.1. If Dom's maximizes profits, its ________ is $240.

Accepted Answer

A)  total revenue 
B)  total cost 
C)  profit 
D)  marginal revenue 
A)  total revenue 
B)  total cost 
C)  profit 
D)  marginal revenue

Question 4

Refer to the information provided in Figure 15.5 below to answer the question(s) that follow.   Figure 15.5
-Refer to Figure 15.5. Assume The Custom Sweater Shop has fixed costs of $500 and is a monopolistically competitive firm. If the firm produces the profit-maximizing level of output and sells it at the profit-maximizing price, the firm ________ of $400.

Accepted Answer

A)  suffers a loss 
B)  earns a profit 
C)  has total revenue 
D)  has total cost 
A)  suffers a loss 
B)  earns a profit 
C)  has total revenue 
D)  has total cost

Question 5

One reason for selecting a section of microeconomics for which attendance is part of the grade (as opposed to one where it is not) is that it serves as a commitment device that will get you to attend class.

Accepted Answer

A) True 
 B)False

Question 6

Which of the following features distinguishes monopolistically competitive firms from monopolies and oligopolies?

Accepted Answer

A)  Monopolistically competitive firms cannot influence market price by virtue of their size alone while monopolies and oligopolies can. 
B)  Monopolistically competitive firms are not constrained by market demand while monopolies and oligopolies are. 
C)  Monopolistically competitive firms are price takers while monopolies and oligopolies are not. 
D)  Monopolistically competitive firms sell a homogeneous product while monopolies and oligopolies sell a differentiated product. 
A)  Monopolistically competitive firms cannot influence market price by virtue of their size alone while monopolies and oligopolies can. 
B)  Monopolistically competitive firms are not constrained by market demand while monopolies and oligopolies are. 
C)  Monopolistically competitive firms are price takers while monopolies and oligopolies are not. 
D)  Monopolistically competitive firms sell a homogeneous product while monopolies and oligopolies sell a differentiated product.

Question 7

Product differentiation that makes the product ________ is known as vertical differentiation.

Accepted Answer

A)  more similar to the rival's product 
B)  better for some consumers and worse for others 
C)  better than a rival's product from everyone's perspective 
D)  less expensive to produce 
A)  more similar to the rival's product 
B)  better for some consumers and worse for others 
C)  better than a rival's product from everyone's perspective 
D)  less expensive to produce

Question 8

For a monopolistically competitive firm in long-run equilibrium,

Accepted Answer

A)  the demand curve must intersect the average total cost curve at the ATC curve minimum. 
B)  the demand curve must be tangent to the average total cost curve at the ATC curve minimum. 
C)  at the profit-maximizing quantity, the demand curve must intersect the average total cost curve. 
D)  at the profit-maximizing quantity, the demand curve must be tangent to the average total cost curve. 
A)  the demand curve must intersect the average total cost curve at the ATC curve minimum. 
B)  the demand curve must be tangent to the average total cost curve at the ATC curve minimum. 
C)  at the profit-maximizing quantity, the demand curve must intersect the average total cost curve. 
D)  at the profit-maximizing quantity, the demand curve must be tangent to the average total cost curve.

Question 9

Firms in a monopolistically competitive industry are small relative to the total market.

Accepted Answer

A) True 
 B)False

Question 10

The more significant are economies of scale in an industry, the more product variety will be observed.

Accepted Answer

A) True 
 B)False

Question 11

Refer to the information provided in Figure 15.5 below to answer the question(s) that follow.   Figure 15.5
-Refer to Figure 15.5. Assume the Custom Sweater Shop has fixed costs of $500 and is a monopolistically competitive firm. To maximize profits in the short run, this firm should set a price of

Accepted Answer

A)  $36. 
B)  $44. 
C)  $46. 
D)  $50. 
A)  $36. 
B)  $44. 
C)  $46. 
D)  $50.

Question 12

The feature that distinguishes monopolistic competition from monopolies and oligopolies is that monopolistically competitive firms

Accepted Answer

A)  cannot influence market price by virtue of their size alone. 
B)  benefit from barriers to entry. 
C)  are price takers. 
D)  do not have price as a decision variable. 
A)  cannot influence market price by virtue of their size alone. 
B)  benefit from barriers to entry. 
C)  are price takers. 
D)  do not have price as a decision variable.

Question 13

When monopolistically competitive firms earn ________ economic profits, other firms ________ an industry in the long run.

Accepted Answer

A)  positive; enter 
B)  zero; enter 
C)  negative; enter 
D)  zero; exit 
A)  positive; enter 
B)  zero; enter 
C)  negative; enter 
D)  zero; exit

Question 14

Refer to the information provided in Figure 15.4 below to answer the question(s) that follow.   Figure 15.4
-Refer to Figure 15.4. Assume The Hand Made Shirt Shop has fixed costs of $150 and is a monopolistically competitive firm. To maximize profits, the firm ________ of $23.

Accepted Answer

A)  has an average total cost 
B)  earns a per-unit profit 
C)  should set a price 
D)  has an average fixed cost 
A)  has an average total cost 
B)  earns a per-unit profit 
C)  should set a price 
D)  has an average fixed cost

Question 15

Product differentiation that makes the product better than a rival's product from everyone's perspective

Accepted Answer

A)  always increases welfare. 
B)  is known as vertical differentiation. 
C)  is known as horizontal differentiation. 
D)  makes the rival's product obsolete. 
A)  always increases welfare. 
B)  is known as vertical differentiation. 
C)  is known as horizontal differentiation. 
D)  makes the rival's product obsolete.

Question 16

Refer to the information provided in Figure 15.3 below to answer the question(s) that follow.   Figure 15.3
-Refer to Figure 15.3. In the short run, this company is ________, and in the long run, it should expect to ________.

Accepted Answer

A)  suffering a loss; break even 
B)  breaking even; break even 
C)  making a profit; break even 
D)  suffering a loss; shut down 
A)  suffering a loss; break even 
B)  breaking even; break even 
C)  making a profit; break even 
D)  suffering a loss; shut down

Question 17

Refer to the information provided in Figure 15.1 below to answer the question(s) that follow. Below are cost curves for Dom's Barber Shop, a monopolistically competitive firm.   Figure 15.1
-Refer to Figure 15.1. If Dom's maximizes profits, it ________ of $80.

Accepted Answer

A)  receives a total revenue 
B)  earns a profit 
C)  has a total cost 
D)  suffers a loss 
A)  receives a total revenue 
B)  earns a profit 
C)  has a total cost 
D)  suffers a loss

Question 18

There is easy entry into the ________ and ________ industries.

Accepted Answer

A)  perfectly competitive; monopolistically competitive 
B)  monopolistically competitive; oligopolistic 
C)  oligopolistic; monopolistic 
D)  monopolistic; perfectly competitive 
A)  perfectly competitive; monopolistically competitive 
B)  monopolistically competitive; oligopolistic 
C)  oligopolistic; monopolistic 
D)  monopolistic; perfectly competitive

Question 19

Refer to the information provided in Figure 15.4 below to answer the question(s) that follow.   Figure 15.4
-Refer to Figure 15.4. In the long run in this monopolistically competitive industry,

Accepted Answer

A)  some firms will leave the industry until the remaining firms break even economically. 
B)  all firms will leave the industry. 
C)  some firms will enter the industry and industry profits will increase. 
D)  product supply will increase so prices will go up. 
A)  some firms will leave the industry until the remaining firms break even economically. 
B)  all firms will leave the industry. 
C)  some firms will enter the industry and industry profits will increase. 
D)  product supply will increase so prices will go up.

Question 20

Refer to the information provided in Figure 15.5 below to answer the question(s) that follow.   Figure 15.5
-Refer to Figure 15.5. Assume The Custom Sweater Shop has fixed costs of $500 and is a monopolistically competitive firm. If the firm is attempting to maximize profits in the short run, the ________ quantity is 100 personalized sweaters.

Accepted Answer

A)  break-even 
B)  profit-minimizing 
C)  loss-minimizing 
D)  shut down 
A)  break-even 
B)  profit-minimizing 
C)  loss-minimizing 
D)  shut down

To maximize profit, a ________ firm will produce where marginal revenue equals marginal cost.

The Do It Yourself Hardware Store is a monopolistically competitive firm. Its marginal revenue curve

Refer to the information provided in Figure 15.1 below to answer the question(s) that follow. Below are cost curves for Dom's Barber Shop, a monopolistically competitive firm. Figure 15.1 -Refer to Figure 15.1. If Dom's maximizes profits, its ________ is $240.

One reason for selecting a section of microeconomics for which attendance is part of the grade (as opposed to one where it is not) is that it serves as a commitment device that will get you to attend class.

Which of the following features distinguishes monopolistically competitive firms from monopolies and oligopolies?

Product differentiation that makes the product ________ is known as vertical differentiation.

For a monopolistically competitive firm in long-run equilibrium,

Firms in a monopolistically competitive industry are small relative to the total market.

The more significant are economies of scale in an industry, the more product variety will be observed.

Refer to the information provided in Figure 15.5 below to answer the question(s) that follow. Figure 15.5 -Refer to Figure 15.5. Assume the Custom Sweater Shop has fixed costs of $500 and is a monopolistically competitive firm. To maximize profits in the short run, this firm should set a price of

The feature that distinguishes monopolistic competition from monopolies and oligopolies is that monopolistically competitive firms

When monopolistically competitive firms earn economic profits, other firms an industry in the long run.

Refer to the information provided in Figure 15.4 below to answer the question(s) that follow. Figure 15.4 -Refer to Figure 15.4. Assume The Hand Made Shirt Shop has fixed costs of $150 and is a monopolistically competitive firm. To maximize profits, the firm ________ of $23.

Product differentiation that makes the product better than a rival's product from everyone's perspective

Refer to the information provided in Figure 15.3 below to answer the question(s) that follow. Figure 15.3 -Refer to Figure 15.3. In the short run, this company is , and in the long run, it should expect to .

Refer to the information provided in Figure 15.1 below to answer the question(s) that follow. Below are cost curves for Dom's Barber Shop, a monopolistically competitive firm. Figure 15.1 -Refer to Figure 15.1. If Dom's maximizes profits, it ________ of $80.

There is easy entry into the and industries.

Refer to the information provided in Figure 15.4 below to answer the question(s) that follow. Figure 15.4 -Refer to Figure 15.4. In the long run in this monopolistically competitive industry,

The Scope and Method of Economics

The Economic Problem: Scarcity and Choice

Demand, Supply, and Market Equilibrium

Demand and Supply Applications

Elasticity

Household Behavior and Consumer Choice

The Production Process: the Behavior of Profit-Maximizing Firms

Short-Run Costs and Output Decisions

Long-Run Costs and Output Decisions

Input Demand: the Labor and Land Markets

Input Demand: the Capital Market and the Investment Decision

General Equilibrium and the Efficiency of Perfect Competition

Monopoly and Antitrust Policy

Oligopoly

Externalities, Public Goods, and Common Resources

Uncertainty and Asymmetric Information

Income Distribution and Poverty

Public Finance: the Economics of Taxation

International Trade, Comparative Advantage, and Protectionism

Economic Growth in Developing Economies

Critical Thinking About Research

Filters

Exam 15: Monopolistic Competition

To maximize profit, a ________ firm will produce where marginal revenue equals marginal cost.

The Do It Yourself Hardware Store is a monopolistically competitive firm. Its marginal revenue curve

Refer to the information provided in Figure 15.1 below to answer the question(s) that follow. Below are cost curves for Dom's Barber Shop, a monopolistically competitive firm. Figure 15.1 -Refer to Figure 15.1. If Dom's maximizes profits, its ________ is $240.

One reason for selecting a section of microeconomics for which attendance is part of the grade (as opposed to one where it is not) is that it serves as a commitment device that will get you to attend class.

Which of the following features distinguishes monopolistically competitive firms from monopolies and oligopolies?

Product differentiation that makes the product ________ is known as vertical differentiation.

For a monopolistically competitive firm in long-run equilibrium,

Firms in a monopolistically competitive industry are small relative to the total market.

The more significant are economies of scale in an industry, the more product variety will be observed.

Refer to the information provided in Figure 15.5 below to answer the question(s) that follow. Figure 15.5 -Refer to Figure 15.5. Assume the Custom Sweater Shop has fixed costs of $500 and is a monopolistically competitive firm. To maximize profits in the short run, this firm should set a price of

The feature that distinguishes monopolistic competition from monopolies and oligopolies is that monopolistically competitive firms

When monopolistically competitive firms earn ________ economic profits, other firms ________ an industry in the long run.

Refer to the information provided in Figure 15.4 below to answer the question(s) that follow. Figure 15.4 -Refer to Figure 15.4. Assume The Hand Made Shirt Shop has fixed costs of $150 and is a monopolistically competitive firm. To maximize profits, the firm ________ of $23.

Product differentiation that makes the product better than a rival's product from everyone's perspective

Refer to the information provided in Figure 15.3 below to answer the question(s) that follow. Figure 15.3 -Refer to Figure 15.3. In the short run, this company is ________, and in the long run, it should expect to ________.

Refer to the information provided in Figure 15.1 below to answer the question(s) that follow. Below are cost curves for Dom's Barber Shop, a monopolistically competitive firm. Figure 15.1 -Refer to Figure 15.1. If Dom's maximizes profits, it ________ of $80.

There is easy entry into the ________ and ________ industries.

Refer to the information provided in Figure 15.4 below to answer the question(s) that follow. Figure 15.4 -Refer to Figure 15.4. In the long run in this monopolistically competitive industry,

The Scope and Method of Economics

The Economic Problem: Scarcity and Choice

Demand, Supply, and Market Equilibrium

Demand and Supply Applications

Elasticity

Household Behavior and Consumer Choice

The Production Process: the Behavior of Profit-Maximizing Firms

Short-Run Costs and Output Decisions

Long-Run Costs and Output Decisions

Input Demand: the Labor and Land Markets

Input Demand: the Capital Market and the Investment Decision

General Equilibrium and the Efficiency of Perfect Competition

Monopoly and Antitrust Policy

Oligopoly

Externalities, Public Goods, and Common Resources

Uncertainty and Asymmetric Information

Income Distribution and Poverty

Public Finance: the Economics of Taxation

International Trade, Comparative Advantage, and Protectionism

Economic Growth in Developing Economies

Critical Thinking About Research

Filters

When monopolistically competitive firms earn economic profits, other firms an industry in the long run.

Refer to the information provided in Figure 15.3 below to answer the question(s) that follow. Figure 15.3 -Refer to Figure 15.3. In the short run, this company is , and in the long run, it should expect to .

There is easy entry into the and industries.