Question 1

In long-run equilibrium for a monopolistically competitive firm, the firm's ________ curve is just tangent to its average total cost curve.

Accepted Answer

A)  supply 
B)  marginal cost 
C)  demand 
D)  marginal revenue 
A)  supply 
B)  marginal cost 
C)  demand 
D)  marginal revenue

Question 2

Monopolistically competitive firms fail to fully realize their economies of scale.

Accepted Answer

A) True 
 B)False

Question 3

Monopolistically competitive firms in long-run equilibrium produce at less than

Accepted Answer

A)  minimum ATC. 
B)  the MR = MC output. 
C)  the optimal scale. 
D)  All of the above are correct. 
A)  minimum ATC. 
B)  the MR = MC output. 
C)  the optimal scale. 
D)  All of the above are correct.

Question 4

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. In this industry in the long run,

Accepted Answer

A)  firms will start to incur economic losses. 
B)  firms will enter until all firms break even economically. 
C)  product demand will increase so that profits are increased. 
D)  product supply will decrease so prices will go up. 
A)  firms will start to incur economic losses. 
B)  firms will enter until all firms break even economically. 
C)  product demand will increase so that profits are increased. 
D)  product supply will decrease so prices will go up.

Question 5

Monopolistically competitive firms experience "excess capacity" in the short run but not in the long run.

Accepted Answer

A) True 
 B)False

Question 6

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 $350 and is a monopolistically competitive firm. To maximize profits in the short run, this firm should produce ________ personalized sweaters.

Accepted Answer

A)  0 
B)  50 
C)  75 
D)  100 
A)  0 
B)  50 
C)  75 
D)  100

Question 7

In well-working markets, any gains from coordination are reflected in the level of product variety.

Accepted Answer

A) True 
 B)False

Question 8

Compared to a monopolistically competitive firm having the same cost curves, a perfectly competitive firm produces ________ output and charges a ________ price.

Accepted Answer

A)  less; higher 
B)  more; lower 
C)  less; lower 
D)  more; higher 
A)  less; higher 
B)  more; lower 
C)  less; lower 
D)  more; higher

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. If We Do Hair is maximizing profit as a monopolistically competitive firm, its total costs are

Accepted Answer

A)  $1,200. 
B)  $960. 
C)  $800. 
D)  $660. 
A)  $1,200. 
B)  $960. 
C)  $800. 
D)  $660.

Question 10

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. If the Custom Sweater Shop is monopolistically competitive, what is the maximum level of average variable cost that would lead to the firm continuing to operate at the profit-maximizing level in the short run?

Accepted Answer

A)  $40 
B)  $46 
C)  $50 
D)  The firm would continue to operate regardless of the level of variable costs. 
A)  $40 
B)  $46 
C)  $50 
D)  The firm would continue to operate regardless of the level of variable costs.

Question 11

In San Francisco there are many retail clothing stores. Each store is slightly different from every other store. Retail clothing stores are an example of what 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 12

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. At the profit-maximizing output in the short run, the firm ________ of $46.

Accepted Answer

A)  has an average total cost 
B)  earns a profit 
C)  should set a price 
D)  has an average variable cost 
A)  has an average total cost 
B)  earns a profit 
C)  should set a price 
D)  has an average variable cost

Question 13

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 $275 and is a monopolistically competitive firm. If this firm is attempting to maximize profits, the firm's profit is

Accepted Answer

A)  -$275. 
B)  -$100. 
C)  -$75. 
D)  $0. 
A)  -$275. 
B)  -$100. 
C)  -$75. 
D)  $0.

Question 14

Monopolistically competitive firms, like perfectly competitive firms, sell a differentiated product.

Accepted Answer

A) True 
 B)False

Question 15

The case against advertising includes the assertion that advertising

Accepted Answer

A)  keeps firms from spending huge sums of money to create artificial differences among goods. 
B)  provides consumers with valuable information about product availability, quality, and price. 
C)  decreases competition by increasing barriers to entry of new firms into an industry. 
D)  ensures high quality and efficient production. 
A)  keeps firms from spending huge sums of money to create artificial differences among goods. 
B)  provides consumers with valuable information about product availability, quality, and price. 
C)  decreases competition by increasing barriers to entry of new firms into an industry. 
D)  ensures high quality and efficient production.

Question 16

The right answer to the debate regarding the welfare effects of advertising is that

Accepted Answer

A)  advertising always leads to concentration in an industry. 
B)  advertising always leads to positive economic profits in an industry. 
C)  advertising always improves the functioning of the market. 
D)  there is no right answer. 
A)  advertising always leads to concentration in an industry. 
B)  advertising always leads to positive economic profits in an industry. 
C)  advertising always improves the functioning of the market. 
D)  there is no right answer.

Question 17

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

Accepted Answer

A)  positive economic; exit 
B)  normal; enter 
C)  negative economic; exit 
D)  normal; exit 
A)  positive economic; exit 
B)  normal; enter 
C)  negative economic; exit 
D)  normal; exit

Question 18

If firms in a monopolistically competitive industry are earning economic profits, then in the long run

Accepted Answer

A)  these firms can continue earning economic profits because entry into the industry is blocked. 
B)  new firms producing close substitutes will enter the industry and this entry will continue until economic profits are eliminated. 
C)  new firms producing the exact same product will enter the industry and this entry will continue until economic profits are eliminated. 
D)  the government will most likely regulate firms in this industry to reduce these economic profits. 
A)  these firms can continue earning economic profits because entry into the industry is blocked. 
B)  new firms producing close substitutes will enter the industry and this entry will continue until economic profits are eliminated. 
C)  new firms producing the exact same product will enter the industry and this entry will continue until economic profits are eliminated. 
D)  the government will most likely regulate firms in this industry to reduce these economic profits.

Question 19

The more homogeneous are consumers' preferences, the less product variety will be observed.

Accepted Answer

A) True 
 B)False

Question 20

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 $75 and is a monopolistically competitive firm. To maximize profits in the short run, this firm should produce ________ personalized sweatshirts.

Accepted Answer

A)  0 
B)  50 
C)  70 
D)  75 
A)  0 
B)  50 
C)  70 
D)  75

In long-run equilibrium for a monopolistically competitive firm, the firm's ________ curve is just tangent to its average total cost curve.

Monopolistically competitive firms fail to fully realize their economies of scale.

Monopolistically competitive firms in long-run equilibrium produce at less than

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. In this industry in the long run,

Monopolistically competitive firms experience "excess capacity" in the short run but not in the long run.

In well-working markets, any gains from coordination are reflected in the level of product variety.

Compared to a monopolistically competitive firm having the same cost curves, a perfectly competitive firm produces output and charges a price.

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 is maximizing profit as a monopolistically competitive firm, its total costs are

In San Francisco there are many retail clothing stores. Each store is slightly different from every other store. Retail clothing stores are an example of what market structure?

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 $275 and is a monopolistically competitive firm. If this firm is attempting to maximize profits, the firm's profit is

Monopolistically competitive firms, like perfectly competitive firms, sell a differentiated product.

The case against advertising includes the assertion that advertising

The right answer to the debate regarding the welfare effects of advertising is that

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

If firms in a monopolistically competitive industry are earning economic profits, then in the long run

The more homogeneous are consumers' preferences, the less product variety will be observed.

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

In long-run equilibrium for a monopolistically competitive firm, the firm's ________ curve is just tangent to its average total cost curve.

Monopolistically competitive firms fail to fully realize their economies of scale.

Monopolistically competitive firms in long-run equilibrium produce at less than

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. In this industry in the long run,

Monopolistically competitive firms experience "excess capacity" in the short run but not in the long run.

In well-working markets, any gains from coordination are reflected in the level of product variety.

Compared to a monopolistically competitive firm having the same cost curves, a perfectly competitive firm produces ________ output and charges a ________ price.

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 is maximizing profit as a monopolistically competitive firm, its total costs are

In San Francisco there are many retail clothing stores. Each store is slightly different from every other store. Retail clothing stores are an example of what market structure?

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 $275 and is a monopolistically competitive firm. If this firm is attempting to maximize profits, the firm's profit is

Monopolistically competitive firms, like perfectly competitive firms, sell a differentiated product.

The case against advertising includes the assertion that advertising

The right answer to the debate regarding the welfare effects of advertising is that

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

If firms in a monopolistically competitive industry are earning economic profits, then in the long run

The more homogeneous are consumers' preferences, the less product variety will be observed.

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

Compared to a monopolistically competitive firm having the same cost curves, a perfectly competitive firm produces output and charges a price.

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