Question 1

A monopolistically competitive firm minimizes its losses by producing where MR = MC as long as

Accepted Answer

A)  P > AVC. 
B)  P > ATC. 
C)  P > MR. 
D)  P > AFC. 
A)  P > AVC. 
B)  P > ATC. 
C)  P > MR. 
D)  P > AFC.

Question 2

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. The profit-maximizing price for a haircut is

Accepted Answer

A)  $10. 
B)  $12. 
C)  $14. 
D)  $16. 
A)  $10. 
B)  $12. 
C)  $14. 
D)  $16.

Question 3

As firms ________ a monopolistically competitive industry the demand and marginal revenue curves facing each firm begin to shift to the ________.

Accepted Answer

A)  expand in; right 
B)  exit; left 
C)  exit; right 
D)  enter; right 
A)  expand in; right 
B)  exit; left 
C)  exit; right 
D)  enter; right

Question 4

A monopolistically competitive firm produces where

Accepted Answer

A)  marginal revenue equals price. 
B)  its marginal revenue curve lies above its demand curve. 
C)  its marginal revenue curve intersects the quantity axis. 
D)  marginal revenue equals marginal cost. 
A)  marginal revenue equals price. 
B)  its marginal revenue curve lies above its demand curve. 
C)  its marginal revenue curve intersects the quantity axis. 
D)  marginal revenue equals marginal cost.

Question 5

Related to the Economics in Practice on page 316: According to the Economics in Practice, which of the following statements is true?

Accepted Answer

A)  Because tastes tend to differ across areas, we would expect to see a wider variety of products available from an online retailer than from an individual brick-and-mortar retailer. 
B)  Even though tastes tend to differ across areas, we tend to see a smaller variety of products available from an online retailer than from an individual brick-and-mortar retailer. 
C)  Because tastes tend to be roughly the same across areas, we would expect to see a about the same variety of products available from an online retailer as from an individual brick-and-mortar retailer. 
D)  Because tastes tend to differ across areas, we would expect to see a smaller variety of products available from an online retailer than from an individual brick-and-mortar retailer. 
A)  Because tastes tend to differ across areas, we would expect to see a wider variety of products available from an online retailer than from an individual brick-and-mortar retailer. 
B)  Even though tastes tend to differ across areas, we tend to see a smaller variety of products available from an online retailer than from an individual brick-and-mortar retailer. 
C)  Because tastes tend to be roughly the same across areas, we would expect to see a about the same variety of products available from an online retailer as from an individual brick-and-mortar retailer. 
D)  Because tastes tend to differ across areas, we would expect to see a smaller variety of products available from an online retailer than from an individual brick-and-mortar retailer.

Question 6

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 $90 and is a monopolistically competitive firm. If the firm is attempting to maximize profits, its profit is

Accepted Answer

A)  -$175. 
B)  -$100. 
C)  -$90. 
D)  $0. 
A)  -$175. 
B)  -$100. 
C)  -$90. 
D)  $0.

Question 7

Mama Lena's, a frozen food producer, is a monopolistically competitive firm. Mama Lena's is currently selling frozen lasagna at a price of $10. Mama Lena's marginal cost is $5 and marginal revenue is $5. This firm should ________ to maximize profits in the short run.

Accepted Answer

A)  increase output to where price just equals marginal cost 
B)  decrease output to where price just equals marginal cost 
C)  continue to produce the same output level 
D)  Indeterminate from the given information. 
A)  increase output to where price just equals marginal cost 
B)  decrease output to where price just equals marginal cost 
C)  continue to produce the same output level 
D)  Indeterminate from the given information.

Question 8

A monopolistically competitive firm that is incurring a loss will shut down if

Accepted Answer

A)  marginal revenue is less than marginal cost. 
B)  revenues are less than variable costs. 
C)  price is less than average total cost. 
D)  price is less than marginal cost. 
A)  marginal revenue is less than marginal cost. 
B)  revenues are less than variable costs. 
C)  price is less than average total cost. 
D)  price is less than marginal cost.

Question 9

For a monopolistically competitive firm, its demand curve is the same as its marginal revenue curve.

Accepted Answer

A) True 
 B)False

Question 10

Advertising provides consumers with product information and can promote competition. Thus, it is always welfare enhancing.

Accepted Answer

A) True 
 B)False

Question 11

Pie-Oh-My, a monopolistically competitive firm, is producing 80 gourmet pies per day and selling each pie for $32. At that production level ATC is $40, AVC is $30, AFC is $10, and both MR and MC are $16. In the short run, this firm should

Accepted Answer

A)  continue to produce 80 pies, as price is greater than AVC. 
B)  increase output to the point where price equals marginal cost. 
C)  decrease output to the point where price equals average total cost. 
D)  shutdown and produce zero pies and pay fixed costs. 
A)  continue to produce 80 pies, as price is greater than AVC. 
B)  increase output to the point where price equals marginal cost. 
C)  decrease output to the point where price equals average total cost. 
D)  shutdown and produce zero pies and pay fixed costs.

Question 12

If firms in a monopolistically competitive industry are incurring losses, in the long run firms will leave this industry until

Accepted Answer

A)  P = MC. 
B)  P = ATC. 
C)  MC = ATC. 
D)  MR = ATC. 
A)  P = MC. 
B)  P = ATC. 
C)  MC = ATC. 
D)  MR = ATC.

Question 13

Refer to the information provided in Figure 15.2 below to answer the question(s) that follow.   Figure 15.2
-Refer to Figure 15.2. If We Do Hair maximizes profits as a monopolistically competitive firm, its ________ is $960.

Accepted Answer

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

Question 14

A(n) ________ industry does not have price as a decision variable.

Accepted Answer

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

Question 15

Compared to a perfectly competitive firm, the demand schedule of a monopolistically competitive firm faces is

Accepted Answer

A)  more price elastic. 
B)  less price elastic. 
C)  perfectly price elastic. 
D)  perfectly price inelastic. 
A)  more price elastic. 
B)  less price elastic. 
C)  perfectly price elastic. 
D)  perfectly price inelastic.

Question 16

A monopolistically competitive firm

Accepted Answer

A)  can sell an infinite amount of output at the market-determined price. 
B)  should lower its price if it intends to reduce output. 
C)  should raise its price if it intends to reduce output. 
D)  sells a fixed amount of output regardless of price. 
A)  can sell an infinite amount of output at the market-determined price. 
B)  should lower its price if it intends to reduce output. 
C)  should raise its price if it intends to reduce output. 
D)  sells a fixed amount of output regardless of price.

Question 17

In ________ monopolistically competitive equilibrium, there will be neither economic profits nor losses.

Accepted Answer

A)  short-run 
B)  long-run 
C)  both short-run and long-run 
D)  neither short-run nor long-run 
A)  short-run 
B)  long-run 
C)  both short-run and long-run 
D)  neither short-run nor long-run

Question 18

The marginal revenue curve for a monopolistically competitive firm, when compared to the marginal revenue curve for a perfectly competitive firm, is

Accepted Answer

A)  flatter. 
B)  steeper. 
C)  identical in that they are both horizontal. 
D)  identical in that they are both vertical. 
A)  flatter. 
B)  steeper. 
C)  identical in that they are both horizontal. 
D)  identical in that they are both vertical.

Question 19

The case for advertising includes the idea that

Accepted Answer

A)  it adds to society's scarce resources. 
B)  firms spend large sums of money to create meaningless differences among products. 
C)  it can promote competition. 
D)  it creates wants that otherwise would not have existed. 
A)  it adds to society's scarce resources. 
B)  firms spend large sums of money to create meaningless differences among products. 
C)  it can promote competition. 
D)  it creates wants that otherwise would not have existed.

Question 20

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 Barber Shop is maximizing profit, its total costs are

Accepted Answer

A)  $200. 
B)  $240. 
C)  $350. 
D)  $360. 
A)  $200. 
B)  $240. 
C)  $350. 
D)  $360.

Exam 15: Monopolistic Competition

A monopolistically competitive firm minimizes its losses by producing where MR = MC as long as

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. The profit-maximizing price for a haircut is

As firms ________ a monopolistically competitive industry the demand and marginal revenue curves facing each firm begin to shift to the ________.

A monopolistically competitive firm produces where

Related to the Economics in Practice on page 316: According to the Economics in Practice, which of the following statements is true?

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 $90 and is a monopolistically competitive firm. If the firm is attempting to maximize profits, its profit is

Mama Lena's, a frozen food producer, is a monopolistically competitive firm. Mama Lena's is currently selling frozen lasagna at a price of $10. Mama Lena's marginal cost is $5 and marginal revenue is $5. This firm should ________ to maximize profits in the short run.

A monopolistically competitive firm that is incurring a loss will shut down if

For a monopolistically competitive firm, its demand curve is the same as its marginal revenue curve.

Advertising provides consumers with product information and can promote competition. Thus, it is always welfare enhancing.

Pie-Oh-My, a monopolistically competitive firm, is producing 80 gourmet pies per day and selling each pie for $32. At that production level ATC is $40, AVC is $30, AFC is $10, and both MR and MC are $16. In the short run, this firm should

If firms in a monopolistically competitive industry are incurring losses, in the long run firms will leave this industry until

Refer to the information provided in Figure 15.2 below to answer the question(s) that follow. Figure 15.2 -Refer to Figure 15.2. If We Do Hair maximizes profits as a monopolistically competitive firm, its ________ is $960.

A(n) ________ industry does not have price as a decision variable.

Compared to a perfectly competitive firm, the demand schedule of a monopolistically competitive firm faces is

A monopolistically competitive firm

In ________ monopolistically competitive equilibrium, there will be neither economic profits nor losses.

The marginal revenue curve for a monopolistically competitive firm, when compared to the marginal revenue curve for a perfectly competitive firm, is

The case for advertising includes the idea that

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 Barber Shop is maximizing profit, its total costs are

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

As firms a monopolistically competitive industry the demand and marginal revenue curves facing each firm begin to shift to the .