Question 1

Use the figure below to answer the following questions.
   
Figure 14.2.1
-Refer to Figure 14.2.1.This firm in monopolistic competition will

Accepted Answer

A) make an economic profit in the short run. 
B) make zero economic profit in the short run. 
C) incur an economic loss. 
D) make an economic profit in the long run. 
E) incur an economic loss in the long run. 
A) make an economic profit in the short run. 
B) make zero economic profit in the short run. 
C) incur an economic loss. 
D) make an economic profit in the long run. 
E) incur an economic loss in the long run.

Question 2

Firms in monopolistic competition make zero economic profit in the long run because

Accepted Answer

A) their costs rise over time. 
B) the demand they face decreases as rival firms offer slightly differentiated products for sale in the same market. 
C) their marginal cost curves slope upward. 
D) the market eventually becomes perfectly competitive. 
E) both A and B are correct. 
A) their costs rise over time. 
B) the demand they face decreases as rival firms offer slightly differentiated products for sale in the same market. 
C) their marginal cost curves slope upward. 
D) the market eventually becomes perfectly competitive. 
E) both A and B are correct.

Question 3

Use the figure below to answer the following questions.
   
Figure 14.2.3
-Refer to Figure 14.2.3.Which demand curve does this monopolistically competitive firm face in the long run?

Accepted Answer

A) demand curve D1 
B) demand curve D2 
C) either demand curve D1 or D2 
D) neither demand curve D1 nor demand curve D2 
E) Any demand curve is possible, including D1 or D2. 
A) demand curve D1 
B) demand curve D2 
C) either demand curve D1 or D2 
D) neither demand curve D1 nor demand curve D2 
E) Any demand curve is possible, including D1 or D2.

Question 4

Use the figure below to answer the following questions.
   
Figure 14.2.6
-Refer to Figure 14.2.6,which shows the demand curve,marginal revenue curve and cost curves faced by Gap.Gap maximizes its profit if it sells ________ jackets per day.

Accepted Answer

A) 200 
B) 240 
C) 275 
D) 140 
E) 280 
A) 200 
B) 240 
C) 275 
D) 140 
E) 280

Question 5

Toronto has a large number of retail stores that sell clothes.Each store has its own characteristics which differ from the other stores.The clothing business in Toronto is an example of

Accepted Answer

A) a duopoly. 
B) an oligopoly. 
C) a perfectly competitive market. 
D) a monopoly. 
E) a monopolistically competitive market. 
A) a duopoly. 
B) an oligopoly. 
C) a perfectly competitive market. 
D) a monopoly. 
E) a monopolistically competitive market.

Question 6

In monopolistic competition

Accepted Answer

A) there are two firms in the market. 
B) the size of one firm is small relative to the size of the industry. 
C) the size of one firm is large relative to the size of the industry. 
D) each firm is a price-taker. 
E) there is only one firm in the market. 
A) there are two firms in the market. 
B) the size of one firm is small relative to the size of the industry. 
C) the size of one firm is large relative to the size of the industry. 
D) each firm is a price-taker. 
E) there is only one firm in the market.

Question 7

Use the figure below to answer the following questions.
   
Figure 14.2.4
-Refer to Figure 14.2.4.The figure represents a monopolistically competitive firm in short-run equilibrium.What is the firm's level of output?

Accepted Answer

A) Q1 
B) Q2 
C) Q3 
D) Q4 
E) zero. 
A) Q1 
B) Q2 
C) Q3 
D) Q4 
E) zero.

Question 8

In the long run,a monopolistically competitive firm will make the same economic profit as

Accepted Answer

A) a monopolistically competitive firm in the short run. 
B) a single-price monopoly. 
C) a price-discriminating monopoly. 
D) a perfectly competitive firm in long-run equilibrium. 
E) none of the above. 
A) a monopolistically competitive firm in the short run. 
B) a single-price monopoly. 
C) a price-discriminating monopoly. 
D) a perfectly competitive firm in long-run equilibrium. 
E) none of the above.

Question 9

Use the figure below to answer the following questions.
   
Figure 14.2.3
-Refer to Figure 14.2.3.Assume this firm faces demand curve D?.When the firm produces the efficient quantity,it produces

Accepted Answer

A) 100 units. 
B) 140 units. 
C) 200 units. 
D) 220 units. 
E) 250 units. 
A) 100 units. 
B) 140 units. 
C) 200 units. 
D) 220 units. 
E) 250 units.

Question 10

Advertising costs in monopolistic competition increase a firm's

Accepted Answer

A) total fixed cost. 
B) marginal cost. 
C) total variable cost. 
D) average variable cost. 
E) both A and B are correct. 
A) total fixed cost. 
B) marginal cost. 
C) total variable cost. 
D) average variable cost. 
E) both A and B are correct.

Question 11

A monopolistically competitive firm is able to influence the price of what it sells because of

Accepted Answer

A) barriers to entry. 
B) economies of scale. 
C) product differentiation. 
D) the fact there are many buyers. 
E) inelastic demand. 
A) barriers to entry. 
B) economies of scale. 
C) product differentiation. 
D) the fact there are many buyers. 
E) inelastic demand.

Question 12

Other than by adjusting price,the two main ways in which a firm in monopolistic competition competes with other firms are by ________ and ________.

Accepted Answer

A) innovation and product development;advertising 
B) taking surveys to discover the wants of its consumers;opening up new retail outlets 
C) changing its method of production;relocating its factories to areas with lower wage rates 
D) decreasing its workforce;using new technology 
E) advertising;producing the efficient quantity 
A) innovation and product development;advertising 
B) taking surveys to discover the wants of its consumers;opening up new retail outlets 
C) changing its method of production;relocating its factories to areas with lower wage rates 
D) decreasing its workforce;using new technology 
E) advertising;producing the efficient quantity

Question 13

Calvin is a custom picture framer.His total fixed cost is $110 a day,and his average variable cost is $1 a frame.He is maximizing his profit by selling 22 picture frames a day for $6 a frame.
Few people know about Calvin's Framery.Calvin thinks that if he spends $10 a day on advertising,he can increase his market and sell 44 picture frames a day for $6 a frame.
If Calvin's belief about the effect of advertising is correct,he

Accepted Answer

A) cannot increase his economic profit by advertising because advertising increases his average total cost. 
B) cannot increase his economic profit by advertising because advertising increases his total cost. 
C) can increase his economic profit by advertising. 
D) can increase his economic profit by advertising only if he raises the price of a picture frame. 
E) can increase his economic profit by advertising only if he can lower his total variable cost. 
A) cannot increase his economic profit by advertising because advertising increases his average total cost. 
B) cannot increase his economic profit by advertising because advertising increases his total cost. 
C) can increase his economic profit by advertising. 
D) can increase his economic profit by advertising only if he raises the price of a picture frame. 
E) can increase his economic profit by advertising only if he can lower his total variable cost.

Question 14

Use the figure below to answer the following question.
   
Figure 14.2.7
-Refer to Figure 14.2.7.The figure shows the demand,marginal revenue,and cost curves for a monopolistically competitive firm in the long run.The firm has excess capacity of

Accepted Answer

A) 4 units. 
B) 8 units. 
C) 16 units. 
D) $10. 
E) $5. 
A) 4 units. 
B) 8 units. 
C) 16 units. 
D) $10. 
E) $5.

Question 15

Which one of the following characteristics is shared by perfect competition and monopolistic competition?

Accepted Answer

A) Firms face a downward-sloping demand curve. 
B) Profit-maximizing quantity occurs where MC = MR. 
C) Long-run equilibrium price equals minimum ATC. 
D) Firms make an economic profit in the long run. 
E) None of the above. 
A) Firms face a downward-sloping demand curve. 
B) Profit-maximizing quantity occurs where MC = MR. 
C) Long-run equilibrium price equals minimum ATC. 
D) Firms make an economic profit in the long run. 
E) None of the above.

Question 16

When firms in monopolistic competition make an economic profit

Accepted Answer

A) firms enter the industry, which increases demand for the product of the firms originally in the market. 
B) firms exit the industry, and demand increases for the products of the firms that remain. 
C) firms exit the industry, and demand decreases for the firms that remain in the industry. 
D) firms enter the industry, and demand decreases for the firms that were originally in the industry. 
E) eventually the market will become a monopoly. 
A) firms enter the industry, which increases demand for the product of the firms originally in the market. 
B) firms exit the industry, and demand increases for the products of the firms that remain. 
C) firms exit the industry, and demand decreases for the firms that remain in the industry. 
D) firms enter the industry, and demand decreases for the firms that were originally in the industry. 
E) eventually the market will become a monopoly.

Question 17

Firefox,Internet Explorer,and Google Chrome browsers are an example of

Accepted Answer

A) goods produced in perfectly competitive markets. 
B) goods produced by monopolies. 
C) product differentiation. 
D) goods that are identical. 
E) product similarity. 
A) goods produced in perfectly competitive markets. 
B) goods produced by monopolies. 
C) product differentiation. 
D) goods that are identical. 
E) product similarity.

Question 18

Use the information below to answer the following questions.
Fact 14.3.2
Suppose that Tommy Hilfiger's marginal cost of a jacket is $100 (a constant marginal cost)and at one of the firm's shops, total fixed cost is $2,000 a day.
The profit-maximizing number of jackets sold in this shop is 20 a day.
Then the shops nearby start to advertise their jackets.The Tommy Hilfiger shop now spends $2,000 a day advertising its jackets, and its profit-maximizing number of jackets sold jumps to 50 a day.
-Refer to Fact.14.3.2.If advertising decreases demand and makes demand more elastic,the price of a Tommy Hilfiger jacket ________.If advertising increases demand and makes demand less elastic,the price of a Tommy Hilfiger jacket ________.
If price falls,markup ________.
If price rises,markup ________.

Accepted Answer

A) falls;rises;rises;falls 
B) rises;falls;falls;rises 
C) falls;rises;falls;rises 
D) rises;falls;rises;falls 
E) falls;rises;does not change;does not change 
A) falls;rises;rises;falls 
B) rises;falls;falls;rises 
C) falls;rises;falls;rises 
D) rises;falls;rises;falls 
E) falls;rises;does not change;does not change

Question 19

Under monopolistic competition,long-run economic profit is zero because of

Accepted Answer

A) product differentiation. 
B) no barriers to entry. 
C) excess capacity. 
D) economic inefficiency. 
E) the downward-sloping demand curve facing each firm. 
A) product differentiation. 
B) no barriers to entry. 
C) excess capacity. 
D) economic inefficiency. 
E) the downward-sloping demand curve facing each firm.

Question 20

In monopolistic competition,advertising costs

Accepted Answer

A) are fixed costs. 
B) can result in the firm producing an amount of output such that its average total cost is lower than if it did not advertise. 
C) shift the ATC curve upward. 
D) all of the above answers are correct. 
E) none of the above answers are correct. 
A) are fixed costs. 
B) can result in the firm producing an amount of output such that its average total cost is lower than if it did not advertise. 
C) shift the ATC curve upward. 
D) all of the above answers are correct. 
E) none of the above answers are correct.

Exam 14: Monopolistic Competition

Use the figure below to answer the following questions. Figure 14.2.1 -Refer to Figure 14.2.1.This firm in monopolistic competition will

Firms in monopolistic competition make zero economic profit in the long run because

Use the figure below to answer the following questions. Figure 14.2.3 -Refer to Figure 14.2.3.Which demand curve does this monopolistically competitive firm face in the long run?

Use the figure below to answer the following questions. Figure 14.2.6 -Refer to Figure 14.2.6,which shows the demand curve,marginal revenue curve and cost curves faced by Gap.Gap maximizes its profit if it sells ________ jackets per day.

Toronto has a large number of retail stores that sell clothes.Each store has its own characteristics which differ from the other stores.The clothing business in Toronto is an example of

In monopolistic competition

Use the figure below to answer the following questions. Figure 14.2.4 -Refer to Figure 14.2.4.The figure represents a monopolistically competitive firm in short-run equilibrium.What is the firm's level of output?

In the long run,a monopolistically competitive firm will make the same economic profit as

Use the figure below to answer the following questions. Figure 14.2.3 -Refer to Figure 14.2.3.Assume this firm faces demand curve D?.When the firm produces the efficient quantity,it produces

Advertising costs in monopolistic competition increase a firm's

A monopolistically competitive firm is able to influence the price of what it sells because of

Other than by adjusting price,the two main ways in which a firm in monopolistic competition competes with other firms are by ________ and ________.

Use the figure below to answer the following question. Figure 14.2.7 -Refer to Figure 14.2.7.The figure shows the demand,marginal revenue,and cost curves for a monopolistically competitive firm in the long run.The firm has excess capacity of

Which one of the following characteristics is shared by perfect competition and monopolistic competition?

When firms in monopolistic competition make an economic profit

Firefox,Internet Explorer,and Google Chrome browsers are an example of

Under monopolistic competition,long-run economic profit is zero because of

In monopolistic competition,advertising costs

What Is Economics?

The Economic Problem

Demand and Supply

Elasticity

Efficiency and Equity

Government Actions in Markets

Global Markets in Action

Utility and Demand

Possibilities, Preferences, and Choices

Organizing Production

Output and Costs

Perfect Competition

Monopoly

Oligopoly

Externalities

Public Goods and Common Resources

Markets for Factors of Production

Economic Inequality

Measuring GDP and Economic Growth

Monitoring Jobs and Inflation

Economic Growth

Finance, Saving, and Investment

Money, the Price Level, and Inflation

The Exchange Rate and the Balance of Payments

Aggregate Supply and Aggregate Demand

Expenditure Multipliers: The Keynesian Model

Canadian Inflation, Unemployment, and Business Cycle

Fiscal Policy

Monetary Policy

International Trade Policy

Filters

Other than by adjusting price,the two main ways in which a firm in monopolistic competition competes with other firms are by and .