Question 1

The real-estate industry is monopolistically competitive,so in this industry

Accepted Answer

A) the market demand curve is a horizontal line. 
B) the market demand curve is upward sloping. 
C) there are few realtors in the market. 
D) excess capacity exists. 
E) excess capacity does not exist. 
A) the market demand curve is a horizontal line. 
B) the market demand curve is upward sloping. 
C) there are few realtors in the market. 
D) excess capacity exists. 
E) excess capacity does not exist.

Question 2

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's economic ________ is ________ a day.

Accepted Answer

A) loss;$8,000 
B) loss;$13,000 
C) profit;$7,200 
D) profit;$13,000 
E) loss;$8,960 
A) loss;$8,000 
B) loss;$13,000 
C) profit;$7,200 
D) profit;$13,000 
E) loss;$8,960

Question 3

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 price does the firm charge?

Accepted Answer

A) P2 
B) P1 
C) P4 
D) P3 
E) P5 
A) P2 
B) P1 
C) P4 
D) P3 
E) P5

Question 4

Selling costs

Accepted Answer

A) are variable costs that increase total cost. 
B) always increase demand for a firm's product. 
C) always decrease demand by increasing competition. 
D) always provide consumers with valuable services. 
E) include marketing expenditures on advertising and packaging. 
A) are variable costs that increase total cost. 
B) always increase demand for a firm's product. 
C) always decrease demand by increasing competition. 
D) always provide consumers with valuable services. 
E) include marketing expenditures on advertising and packaging.

Question 5

Excess capacity and high advertising expenditures are encountered in

Accepted Answer

A) monopoly. 
B) oligopoly. 
C) monopolistic competition. 
D) perfect competition. 
E) all markets. 
A) monopoly. 
B) oligopoly. 
C) monopolistic competition. 
D) perfect competition. 
E) all markets.

Question 6

Firms in monopolistic competition have rivals that

Accepted Answer

A) will always match their price increases. 
B) will always match their price decreases but not their price increases. 
C) all agree on a common price. 
D) set their price where the demand curve is tangent to the average cost curve. 
E) set their price according to the demand they face. 
A) will always match their price increases. 
B) will always match their price decreases but not their price increases. 
C) all agree on a common price. 
D) set their price where the demand curve is tangent to the average cost curve. 
E) set their price according to the demand they face.

Question 7

Use the figure below to answer the following questions.
   
Figure 14.2.5
-Refer to Figure 14.2.5.The figure shows the situation facing Smart Digit,Inc.,a firm in monopolistic competition that produces calculators.The firm's markup is ________ per calculator.

Accepted Answer

A) zero 
B) $2 
C) $4 
D) $6 
E) $10 
A) zero 
B) $2 
C) $4 
D) $6 
E) $10

Question 8

In long-run equilibrium,a firm in monopolistic competition

Accepted Answer

A) makes zero economic profit and operates with excess capacity. 
B) makes zero economic profit and produces above capacity output. 
C) makes a positive economic profit and operates with excess capacity. 
D) makes a positive economic profit and produces above capacity output. 
E) incurs an economic loss and exits the market. 
A) makes zero economic profit and operates with excess capacity. 
B) makes zero economic profit and produces above capacity output. 
C) makes a positive economic profit and operates with excess capacity. 
D) makes a positive economic profit and produces above capacity output. 
E) incurs an economic loss and exits the market.

Question 9

Use the figure below to answer the following questions.
   
Figure 14.2.2
-Refer to Figure 14.2.2.To maximize economic profit,this firm in monopolistic competition will charge a price of

Accepted Answer

A) $15 a unit. 
B) $25 a unit. 
C) $20 a unit. 
D) $32 a unit. 
E) $35 a unit. 
A) $15 a unit. 
B) $25 a unit. 
C) $20 a unit. 
D) $32 a unit. 
E) $35 a unit.

Question 10

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?.If this firm in monopolistic competition is maximizing profit,

Accepted Answer

A) there will be entry of rival firms into the industry. 
B) rival firms will exit the industry. 
C) the market is efficient. 
D) this firm will exit the industry in the long run. 
E) its profit will rise over time. 
A) there will be entry of rival firms into the industry. 
B) rival firms will exit the industry. 
C) the market is efficient. 
D) this firm will exit the industry in the long run. 
E) its profit will rise over time.

Question 11

Use the figure below to answer the following questions.
   
Figure 14.2.2
-Refer to Figure 14.2.2.To maximize economic profit,this firm in monopolistic competition produces an output

Accepted Answer

A) of 40 units. 
B) of 70 units. 
C) of 60 units. 
D) that cannot be determined without information concerning rival firms. 
E) of less than 40 units. 
A) of 40 units. 
B) of 70 units. 
C) of 60 units. 
D) that cannot be determined without information concerning rival firms. 
E) of less than 40 units.

Question 12

A firm in a monopolistically competitive market

Accepted Answer

A) faces an upward-sloping demand curve. 
B) faces a downward-sloping demand curve. 
C) practices product differentiation. 
D) faces a horizontal demand curve. 
E) B and C are correct. 
A) faces an upward-sloping demand curve. 
B) faces a downward-sloping demand curve. 
C) practices product differentiation. 
D) faces a horizontal demand curve. 
E) B and C are correct.

Question 13

Monopolistic competition differs from monopoly because in monopolistic competition

Accepted Answer

A) firms maximize profits. 
B) firms set marginal revenue equal to marginal cost to maximize profit. 
C) firms are free to enter and exit. 
D) All of the above are differences between monopoly and monopolistically competitive firms. 
E) None of the above are differences between monopoly and monopolistically competitive firms. 
A) firms maximize profits. 
B) firms set marginal revenue equal to marginal cost to maximize profit. 
C) firms are free to enter and exit. 
D) All of the above are differences between monopoly and monopolistically competitive firms. 
E) None of the above are differences between monopoly and monopolistically competitive firms.

Question 14

In monopolistic competition

Accepted Answer

A) firms can collude. 
B) each firm has a small market share. 
C) each firm pays attention to every other firm. 
D) firms make a profit in the long run. 
E) all of the above. 
A) firms can collude. 
B) each firm has a small market share. 
C) each firm pays attention to every other firm. 
D) firms make a profit in the long run. 
E) all of the above.

Question 15

Mrs.Smith's bakery shop is a firm in monopolistic competition.If in the short-run Mrs.Smith incurs an economic loss,she will keep producing as long as

Accepted Answer

A) price is less than average variable cost. 
B) price is equal to marginal cost. 
C) price is greater than or equal to average variable cost. 
D) marginal revenue is greater than or equal to average variable cost. 
E) marginal revenue is less than average variable cost. 
A) price is less than average variable cost. 
B) price is equal to marginal cost. 
C) price is greater than or equal to average variable cost. 
D) marginal revenue is greater than or equal to average variable cost. 
E) marginal revenue is less than average variable cost.

Question 16

Mrs.Smith's bakery shop is a firm in monopolistic competition.She is currently selling a box of bread for $16.The firm's marginal cost is $7 and marginal revenue is $7.To maximize economic profit Mrs.Smith

Accepted Answer

A) shuts down. 
B) decreases output so that marginal revenue exceeds marginal cost. 
C) continues to produce the same level of output. 
D) increases output so that marginal cost exceeds marginal revenue. 
E) decreases output so that marginal cost equals the output price. 
A) shuts down. 
B) decreases output so that marginal revenue exceeds marginal cost. 
C) continues to produce the same level of output. 
D) increases output so that marginal cost exceeds marginal revenue. 
E) decreases output so that marginal cost equals the output price.

Question 17

Which of the following is always true regarding a profit-maximizing monopolistically competitive firm in short-run equilibrium?

Accepted Answer

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

Question 18

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?.If the firm produced the efficient quantity,it would produce

Accepted Answer

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

Question 19

Which of the following best explains why firms in monopolistic competition face a downward- sloping demand curve while perfectly competitive firms do not?

Accepted Answer

A) Monopolistically competitive industries have only a few firms. 
B) Monopolistically competitive firms face barriers to entry. 
C) Only industries with free entry and exit have firms that face horizontal demand curves. 
D) Firms in monopolistic competition are price takers. 
E) Firms in monopolistic competition sell a differentiated good. 
A) Monopolistically competitive industries have only a few firms. 
B) Monopolistically competitive firms face barriers to entry. 
C) Only industries with free entry and exit have firms that face horizontal demand curves. 
D) Firms in monopolistic competition are price takers. 
E) Firms in monopolistic competition sell a differentiated good.

Question 20

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?.If the firm produces the efficient quantity,it

Accepted Answer

A) makes an economic profit. 
B) makes zero economic profit. 
C) incurs an economic loss. 
D) is in a long-run equilibrium. 
E) will face competition from new firms entering the industry. 
A) makes an economic profit. 
B) makes zero economic profit. 
C) incurs an economic loss. 
D) is in a long-run equilibrium. 
E) will face competition from new firms entering the industry.

Exam 14: Monopolistic Competition

The real-estate industry is monopolistically competitive,so in this industry

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's economic ________ is ________ a day.

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 price does the firm charge?

Selling costs

Excess capacity and high advertising expenditures are encountered in

Firms in monopolistic competition have rivals that

Use the figure below to answer the following questions. Figure 14.2.5 -Refer to Figure 14.2.5.The figure shows the situation facing Smart Digit,Inc.,a firm in monopolistic competition that produces calculators.The firm's markup is ________ per calculator.

In long-run equilibrium,a firm in monopolistic competition

Use the figure below to answer the following questions. Figure 14.2.2 -Refer to Figure 14.2.2.To maximize economic profit,this firm in monopolistic competition will charge a price of

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?.If this firm in monopolistic competition is maximizing profit,

Use the figure below to answer the following questions. Figure 14.2.2 -Refer to Figure 14.2.2.To maximize economic profit,this firm in monopolistic competition produces an output

A firm in a monopolistically competitive market

Monopolistic competition differs from monopoly because in monopolistic competition

In monopolistic competition

Mrs.Smith's bakery shop is a firm in monopolistic competition.If in the short-run Mrs.Smith incurs an economic loss,she will keep producing as long as

Mrs.Smith's bakery shop is a firm in monopolistic competition.She is currently selling a box of bread for $16.The firm's marginal cost is $7 and marginal revenue is $7.To maximize economic profit Mrs.Smith

Which of the following is always true regarding a profit-maximizing monopolistically competitive firm in short-run equilibrium?

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?.If the firm produced the efficient quantity,it would produce

Which of the following best explains why firms in monopolistic competition face a downward- sloping demand curve while perfectly competitive firms do not?

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?.If the firm produces the efficient quantity,it

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

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's economic is a day.