Question 1

In the long run,a monopolistically competitive firm produces the output at which price equals

Accepted Answer

A) marginal cost. 
B) marginal revenue. 
C) average variable cost. 
D) average total cost. 
E) B and D. 
A) marginal cost. 
B) marginal revenue. 
C) average variable cost. 
D) average total cost. 
E) B and D.

Question 2

For a monopolistically competitive firm to be making an economic profit,

Accepted Answer

A) the production period must be the short run. 
B) the production period must be the long run. 
C) rival firms must not exist. 
D) its rivals must also be making an economic profit. 
E) barriers to entry must exist. 
A) the production period must be the short run. 
B) the production period must be the long run. 
C) rival firms must not exist. 
D) its rivals must also be making an economic profit. 
E) barriers to entry must exist.

Question 3

Use the figure below to answer the following questions.
   
Figure 14.2.1
-Refer to Figure 14.2.1.If this firm is in monopolistic competition,it will produce an output level

Accepted Answer

A) of 40 units. 
B) of 60 units. 
C) of 80 units. 
D) that is impossible to determine without information concerning the rival firms. 
E) that is less than 40 units. 
A) of 40 units. 
B) of 60 units. 
C) of 80 units. 
D) that is impossible to determine without information concerning the rival firms. 
E) that is less than 40 units.

Question 4

Advertising costs are ________ costs and the per unit cost of advertising ________ as production increases.

Accepted Answer

A) fixed;increases 
B) variable;increases 
C) fixed;decreases 
D) variable;does not change 
E) variable;decreases 
A) fixed;increases 
B) variable;increases 
C) fixed;decreases 
D) variable;does not change 
E) variable;decreases

Question 5

A textbook publisher is in monopolistic competition.If the firm spends nothing on advertising,it can sell no books at $100 a book,but for each $10 cut in price,the quantity of books it can sell increases by 20 books a day.The firm's total fixed cost is $2,400 a day.Its average variable cost and marginal cost is a constant $20 per book.If the firm spends $1,200 a day on advertising,it can increase the quantity of books sold at each price by 50 percent.If the publisher advertises,its profit maximizing level of output is

Accepted Answer

A) 120 books per day. 
B) 80 books per day. 
C) 160 books per day. 
D) 100 books per day. 
E) 240 books per day. 
A) 120 books per day. 
B) 80 books per day. 
C) 160 books per day. 
D) 100 books per day. 
E) 240 books per day.

Question 6

A firm's efficient scale is the quantity at which ________ is a minimum.
A firm has excess capacity if it produces ________ its efficient scale.
In the long run,a firm in monopolistic competition produces less than the efficient scale and has excess capacity because the firm faces a ________ demand curve.

Accepted Answer

A) average total cost;below;downward-sloping 
B) marginal cost;above;horizontal 
C) average total cost;above;downward-sloping 
D) marginal cost;below;horizontal 
E) average variable cost;below;downward-sloping 
A) average total cost;below;downward-sloping 
B) marginal cost;above;horizontal 
C) average total cost;above;downward-sloping 
D) marginal cost;below;horizontal 
E) average variable cost;below;downward-sloping

Question 7

Firms in monopolistic competition in the short run always

Accepted Answer

A) set price above marginal cost. 
B) make an economic profit. 
C) set price equal to marginal cost. 
D) produce at the minimum average total cost. 
E) break even. 
A) set price above marginal cost. 
B) make an economic profit. 
C) set price equal to marginal cost. 
D) produce at the minimum average total cost. 
E) break even.

Question 8

In monopolistic competition,each firm supplies a ________ part of the total industry output and its actions ________ the actions of the other firms.

Accepted Answer

A) small;do not directly affect 
B) small;directly affect 
C) large;do not directly affect 
D) large;directly affect 
E) large;may or may not directly affect 
A) small;do not directly affect 
B) small;directly affect 
C) large;do not directly affect 
D) large;directly affect 
E) large;may or may not directly affect

Question 9

Choose the correct statement about firms in monopolistic competition.

Accepted Answer

A) All firms make positive economic profit. 
B) The price is set equal to marginal cost to achieve maximum economic profit. 
C) Price is lower than in perfect competition. 
D) Production always takes place at minimum average total cost. 
E) The price is always greater than the marginal cost. 
A) All firms make positive economic profit. 
B) The price is set equal to marginal cost to achieve maximum economic profit. 
C) Price is lower than in perfect competition. 
D) Production always takes place at minimum average total cost. 
E) The price is always greater than the marginal cost.

Question 10

In the long run,all firms in an industry that is monopolistically competitive

Accepted Answer

A) produce at their efficient scale. 
B) set price equal to marginal cost. 
C) incur an economic profit. 
D) make an economic profit. 
E) make zero economic profit. 
A) produce at their efficient scale. 
B) set price equal to marginal cost. 
C) incur an economic profit. 
D) make an economic profit. 
E) make zero economic profit.

Question 11

In monopolistic competition,firms compete on the basis of

Accepted Answer

A) price only. 
B) price, quality, and marketing. 
C) marketing only. 
D) quality and marketing, but not price. 
E) quality only. 
A) price only. 
B) price, quality, and marketing. 
C) marketing only. 
D) quality and marketing, but not price. 
E) quality only.

Exam 14: Monopolistic Competition

In the long run,a monopolistically competitive firm produces the output at which price equals

For a monopolistically competitive firm to be making an economic profit,

Use the figure below to answer the following questions. Figure 14.2.1 -Refer to Figure 14.2.1.If this firm is in monopolistic competition,it will produce an output level

Advertising costs are ________ costs and the per unit cost of advertising ________ as production increases.

Firms in monopolistic competition in the short run always

In monopolistic competition,each firm supplies a ________ part of the total industry output and its actions ________ the actions of the other firms.

Choose the correct statement about firms in monopolistic competition.

In the long run,all firms in an industry that is monopolistically competitive

In monopolistic competition,firms compete on the basis of

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

Advertising costs are costs and the per unit cost of advertising as production increases.

In monopolistic competition,each firm supplies a part of the total industry output and its actions the actions of the other firms.