Question 1

Related to the Economics in Practice on page 318: Producers of Honest Tea stop adding sugar to their tea when the marginal utility to consumers of doing so is

Accepted Answer

A)  positive. 
B)  negative. 
C)  zero. 
D)  Indeterminate from the given information. 
A)  positive. 
B)  negative. 
C)  zero. 
D)  Indeterminate from the given information.

Question 2

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. Gwen's Country Curtains is currently manufacturing and selling 1,000 pairs of curtains per month. The ________ for this company is $80,000.

Accepted Answer

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

Question 3

Related to the Economics in Practice on page 318: A company selling iced tea discovers that as sugar is added to tea, customers' opinions of the taste of the tea rises for the first few grams of sugar and then drops. Even so, the company chooses not to add the amount sugar that would result in the best-tasting tea. Which of the following would explain why adding less sugar could be a wise decision?

Accepted Answer

A)  The price of sugar added to tea is much less significant than the price of other ingredients, such as tea leaves. 
B)  Manufacturers of tea are required to clearly indicate the amount of sugar in their products. 
C)  Teas with less sugar are more likely to appeal to health-conscious consumers. 
D)  Many products in the cold drink market are sold with substitutes for sugar, such as high fructose corn syrup. 
A)  The price of sugar added to tea is much less significant than the price of other ingredients, such as tea leaves. 
B)  Manufacturers of tea are required to clearly indicate the amount of sugar in their products. 
C)  Teas with less sugar are more likely to appeal to health-conscious consumers. 
D)  Many products in the cold drink market are sold with substitutes for sugar, such as high fructose corn syrup.

Question 4

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. At We Do Hair, a monopolistically competitive firm, the ________ perm is $32.

Accepted Answer

A)  average total cost of a 
B)  marginal cost of a 
C)  profit on each 
D)  profit-maximizing price for a 
A)  average total cost of a 
B)  marginal cost of a 
C)  profit on each 
D)  profit-maximizing price for a

Question 5

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 ________ equals $320.

Accepted Answer

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

Question 6

Monopolistically competitive firms use a(n) ________ strategy to achieve market power.

Accepted Answer

A)  product differentiation 
B)  dominant 
C)  maximin 
D)  opportunistic behavior 
A)  product differentiation 
B)  dominant 
C)  maximin 
D)  opportunistic behavior

Question 7

Monopolistically competitive firms are like perfectly competitive firms in that they both sell homogeneous products.

Accepted Answer

A) True 
 B)False

Question 8

Easy entry of new firms is not a characteristic for ________ industries.

Accepted Answer

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

Question 9

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. At We Do Hair, a monopolistically competitive firm, the profit-maximizing price for a perm is

Accepted Answer

A)  $32. 
B)  $28. 
C)  $24. 
D)  $20. 
A)  $32. 
B)  $28. 
C)  $24. 
D)  $20.

Question 10

When MR = MC and P = ATC for a monopolistically competitive firm, the firm is in

Accepted Answer

A)  short‐run disequilibrium. 
B)  long‐run disequilibrium. 
C)  long‐run equilibrium. 
D)  neither short‐run nor long‐run equilibrium. 
A)  short‐run disequilibrium. 
B)  long‐run disequilibrium. 
C)  long‐run equilibrium. 
D)  neither short‐run nor long‐run equilibrium.

Question 11

Since a monopolistically competitive firm has a monopoly over the particular product it produces, the firm is guaranteed a profit in the long run.

Accepted Answer

A) True 
 B)False

Question 12

The Specialty Cake Store, a monopolistically competitive firm, is producing 200 decorated cakes per day and selling each cake for $12. At that production level ATC is $20, AVC is $15, AFC is $5, and both MR and MC are $8. This firm should

Accepted Answer

A)  continue to produce 200 cakes, as price is greater than AFC. 
B)  increase output to the point where price equals marginal cost. 
C)  decrease output to the point where marginal cost equals average cost. 
D)  produce zero cakes and just pay fixed costs. 
A)  continue to produce 200 cakes, as price is greater than AFC. 
B)  increase output to the point where price equals marginal cost. 
C)  decrease output to the point where marginal cost equals average cost. 
D)  produce zero cakes and just pay fixed costs.

Question 13

The basic function of advertising, according to its proponents, is to assist consumers in making informed, rational choices.

Accepted Answer

A) True 
 B)False

Question 14

The long-run equilibrium for a monopolistically competitive firm is efficient because its profits equal zero in the long run.

Accepted Answer

A) True 
 B)False

Question 15

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, it is earning a profit of

Accepted Answer

A)  $0. 
B)  $80. 
C)  $120. 
D)  $320. 
A)  $0. 
B)  $80. 
C)  $120. 
D)  $320.

Question 16

Horizontal differentiation makes products better for some consumers and worse for others.

Accepted Answer

A) True 
 B)False

Question 17

Advertising can create a barrier to entry of new firms into an industry and therefore reduce competition.

Accepted Answer

A) True 
 B)False

Question 18

In Chicago there are many restaurants. Each restaurant is slightly different from every other restaurant. Restaurants are an example of which market structure?

Accepted Answer

A)  perfect competition 
B)  monopolistic competition 
C)  oligopoly 
D)  monopoly 
A)  perfect competition 
B)  monopolistic competition 
C)  oligopoly 
D)  monopoly

Question 19

Unlike a monopolistic firm's product, a monopolistically competitive firm's product

Accepted Answer

A)  is homogeneous. 
B)  is a unique product. 
C)  has many close substitutes. 
D)  has no close substitutes. 
A)  is homogeneous. 
B)  is a unique product. 
C)  has many close substitutes. 
D)  has no close substitutes.

Question 20

The case for product differentiation includes the assertion that

Accepted Answer

A)  even products that do not satisfy a real demand survive. 
B)  standards of living rarely improve with product innovation. 
C)  new products satisfy people with different preferences. 
D)  it wastes society's scarce resources. 
A)  even products that do not satisfy a real demand survive. 
B)  standards of living rarely improve with product innovation. 
C)  new products satisfy people with different preferences. 
D)  it wastes society's scarce resources.

Exam 15: Monopolistic Competition

Related to the Economics in Practice on page 318: Producers of Honest Tea stop adding sugar to their tea when the marginal utility to consumers of doing so is

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. Gwen's Country Curtains is currently manufacturing and selling 1,000 pairs of curtains per month. The ________ for this company is $80,000.

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. At We Do Hair, a monopolistically competitive firm, the ________ perm is $32.

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 ________ equals $320.

Monopolistically competitive firms use a(n) ________ strategy to achieve market power.

Monopolistically competitive firms are like perfectly competitive firms in that they both sell homogeneous products.

Easy entry of new firms is not a characteristic for ________ industries.

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. At We Do Hair, a monopolistically competitive firm, the profit-maximizing price for a perm is

When MR = MC and P = ATC for a monopolistically competitive firm, the firm is in

Since a monopolistically competitive firm has a monopoly over the particular product it produces, the firm is guaranteed a profit in the long run.

The Specialty Cake Store, a monopolistically competitive firm, is producing 200 decorated cakes per day and selling each cake for $12. At that production level ATC is $20, AVC is $15, AFC is $5, and both MR and MC are $8. This firm should

The basic function of advertising, according to its proponents, is to assist consumers in making informed, rational choices.

The long-run equilibrium for a monopolistically competitive firm is efficient because its profits equal zero in the long run.

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, it is earning a profit of

Horizontal differentiation makes products better for some consumers and worse for others.

Advertising can create a barrier to entry of new firms into an industry and therefore reduce competition.

In Chicago there are many restaurants. Each restaurant is slightly different from every other restaurant. Restaurants are an example of which market structure?

Unlike a monopolistic firm's product, a monopolistically competitive firm's product

The case for product differentiation includes the assertion that

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

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