Question 1

In which of these continuums of degrees of competition (highest to lowest) is monopolistic competition properly placed?

Accepted Answer

A) pure competition, oligopoly, pure monopoly, monopolistic competition 
B) oligopoly, pure competition, monopolistic competition, pure monopoly 
C) monopolistic competition, pure competition, pure monopoly, oligopoly 
D) pure competition, monopolistic competition, oligopoly, pure monopoly 
A) pure competition, oligopoly, pure monopoly, monopolistic competition 
B) oligopoly, pure competition, monopolistic competition, pure monopoly 
C) monopolistic competition, pure competition, pure monopoly, oligopoly 
D) pure competition, monopolistic competition, oligopoly, pure monopoly

Question 2

A significant difference between a monopolistically competitive firm and a purely competitive firm is that the

Accepted Answer

A) former has fewer barriers to entry into the industry. 
B) latter recognizes that price must be reduced to sell more output. 
C) latterâ€™s demand curve is perfectly elastic. 
D) latter differentiates its product.Difficulty: 01 Easy 
A) former has fewer barriers to entry into the industry. 
B) latter recognizes that price must be reduced to sell more output. 
C) latterâ€™s demand curve is perfectly elastic. 
D) latter differentiates its product.Difficulty: 01 Easy

Question 3

Compared to pure competition, monopolistic competition

Accepted Answer

A) provides greater product differentiation at the cost of lower productive efficiency. 
B) offers less product differentiation but attains a higher productive efficiency. 
C) provides greater product differentiation and achieves greater productive efficiency. 
D) offers less product differentiation and lower productive efficiency. 
A) provides greater product differentiation at the cost of lower productive efficiency. 
B) offers less product differentiation but attains a higher productive efficiency. 
C) provides greater product differentiation and achieves greater productive efficiency. 
D) offers less product differentiation and lower productive efficiency.

Question 4

Which of the following is correct for a monopolistically competitive firm in long-run equilibrium?

Accepted Answer

A) MC = ATC. 
B) MC exceeds MR. 
C) P exceeds minimum ATC. 
D) P = MC. 
A) MC = ATC. 
B) MC exceeds MR. 
C) P exceeds minimum ATC. 
D) P = MC.

Question 5

The long-run equilibrium position of the monopolistically competitive firm occurs at a point where average costs are

Accepted Answer

A) constant. 
B) increasing. 
C) decreasing. 
D) at their minimum point. 
A) constant. 
B) increasing. 
C) decreasing. 
D) at their minimum point.

Question 6

In the long run, the representative firm in monopolistic competition tends to have

Accepted Answer

A) excess capacity. 
B) economic profits. 
C) no product differentiation. 
D) a perfectly elastic demand curve. 
A) excess capacity. 
B) economic profits. 
C) no product differentiation. 
D) a perfectly elastic demand curve.

Question 7

If some firms leave a monopolistically competitive industry, the demand curves of the remaining firms will

Accepted Answer

A) be unaffected. 
B) shift to the left. 
C) become more elastic. 
D) shift to the right. 
A) be unaffected. 
B) shift to the left. 
C) become more elastic. 
D) shift to the right.

Question 8

Which statement concerning monopolistic competition is false?

Accepted Answer

A) In the long run P = ATC > MC. 
B) Firms may experience losses in the short run. 
C) Firms differentiate their products, but the products are relatively substitutable. 
D) Firms may experience positive economic profits in the long run. 
A) In the long run P = ATC > MC. 
B) Firms may experience losses in the short run. 
C) Firms differentiate their products, but the products are relatively substitutable. 
D) Firms may experience positive economic profits in the long run.

Question 9

Long-run profits of individual firms in monopolistic competition will be larger than their short-run profits.

Accepted Answer

A) True 
 B)False

Question 10

Pure competition results in a lower price but identical output level compared to those in monopolistic competition.

Accepted Answer

A) True 
 B)False

Question 11

Monopolistically competitive and purely competitive industries are similar in that

Accepted Answer

A) both are assured of short-run economic profits. 
B) both produce differentiated products. 
C) the demand curves facing individual firms are perfectly elastic in both industries. 
D) there are few, if any, barriers to entry. 
A) both are assured of short-run economic profits. 
B) both produce differentiated products. 
C) the demand curves facing individual firms are perfectly elastic in both industries. 
D) there are few, if any, barriers to entry.

Question 12

Monopolistic competition is characterized by a

Accepted Answer

A) few dominant firms and low entry barriers. 
B) large number of firms and substantial entry barriers. 
C) large number of firms and low entry barriers. 
D) few dominant firms and substantial entry barriers. 
A) few dominant firms and low entry barriers. 
B) large number of firms and substantial entry barriers. 
C) large number of firms and low entry barriers. 
D) few dominant firms and substantial entry barriers.

Question 13

Communist central planners didnâ€™t care about product differentiation, opting instead for a uniform design of products in order to achieve

Accepted Answer

A) higher prices and profits for their firms. 
B) mass production and lower costs. 
C) allocative efficiency in society. 
D) purely competitive markets. 
A) higher prices and profits for their firms. 
B) mass production and lower costs. 
C) allocative efficiency in society. 
D) purely competitive markets.

Question 14

At long-run equilibrium in monopolistic competition, there is

Accepted Answer

A) allocative efficiency but not productive efficiency. 
B) productive efficiency but not allocative efficiency. 
C) both allocative and productive efficiency. 
D) neither allocative nor productive efficiency. 
A) allocative efficiency but not productive efficiency. 
B) productive efficiency but not allocative efficiency. 
C) both allocative and productive efficiency. 
D) neither allocative nor productive efficiency.

Question 15

The four-firm concentration ratio cannot have a value above 1.0.

Accepted Answer

A) True 
 B)False

Question 16

Keely says that heâ€™s glad that his morning coffee is sold in a monopolistically competitive market rather than a purely competitive market.If this is true for most things Keely buys, it suggests that he

Accepted Answer

A) is most concerned about paying the lowest price possible. 
B) cares most about allocative efficiency. 
C) is willing to pay extra for product variety. 
D) is a creature of habit who always buys the same type of a particular good. 
A) is most concerned about paying the lowest price possible. 
B) cares most about allocative efficiency. 
C) is willing to pay extra for product variety. 
D) is a creature of habit who always buys the same type of a particular good.

Question 17

In the long run, the price charged by the monopolistically competitive firm attempting to maximize profits

Accepted Answer

A) must be less than ATC. 
B) must be more than ATC. 
C) may be either equal to ATC, less than ATC, or more than ATC. 
D) will be equal to ATC. 
A) must be less than ATC. 
B) must be more than ATC. 
C) may be either equal to ATC, less than ATC, or more than ATC. 
D) will be equal to ATC.

Question 18

(Last Word) If the minimum wage in the restaurant industry increases over time, eventually we would expect

Accepted Answer

A) the restaurant industry to expand as higher wages drive up demand. 
B) there to be fewer of all types of restaurants, but no change in the proportion of mom and pop restaurants relative to chain restaurants. 
C) the ratio of mom and pop restaurants to highly capitalized chain restaurants to increase. 
D) the ratio of highly capitalized chain restaurants to mom and pop restaurants to increase. 
A) the restaurant industry to expand as higher wages drive up demand. 
B) there to be fewer of all types of restaurants, but no change in the proportion of mom and pop restaurants relative to chain restaurants. 
C) the ratio of mom and pop restaurants to highly capitalized chain restaurants to increase. 
D) the ratio of highly capitalized chain restaurants to mom and pop restaurants to increase.

Question 19

Monopolistically competitive firms are inefficient because they produce at a point on the rising segment of their average cost curves.

Accepted Answer

A) True 
 B)False

Question 20

Monopolistically competitive firms will achieve the most efficient allocation of society's resources because there are no significant barriers to entry into the industry.

Accepted Answer

A) True 
 B)False

Exam 13: Monopolistic Competition

In which of these continuums of degrees of competition (highest to lowest) is monopolistic competition properly placed?

A significant difference between a monopolistically competitive firm and a purely competitive firm is that the

Compared to pure competition, monopolistic competition

Which of the following is correct for a monopolistically competitive firm in long-run equilibrium?

The long-run equilibrium position of the monopolistically competitive firm occurs at a point where average costs are

In the long run, the representative firm in monopolistic competition tends to have

If some firms leave a monopolistically competitive industry, the demand curves of the remaining firms will

Which statement concerning monopolistic competition is false?

Long-run profits of individual firms in monopolistic competition will be larger than their short-run profits.

Pure competition results in a lower price but identical output level compared to those in monopolistic competition.

Monopolistically competitive and purely competitive industries are similar in that

Monopolistic competition is characterized by a

Communist central planners didnâ€™t care about product differentiation, opting instead for a uniform design of products in order to achieve

At long-run equilibrium in monopolistic competition, there is

The four-firm concentration ratio cannot have a value above 1.0.

Keely says that heâ€™s glad that his morning coffee is sold in a monopolistically competitive market rather than a purely competitive market.If this is true for most things Keely buys, it suggests that he

In the long run, the price charged by the monopolistically competitive firm attempting to maximize profits

(Last Word) If the minimum wage in the restaurant industry increases over time, eventually we would expect

Monopolistically competitive firms are inefficient because they produce at a point on the rising segment of their average cost curves.

Monopolistically competitive firms will achieve the most efficient allocation of society's resources because there are no significant barriers to entry into the industry.

Limits, Alternatives, and Choices

The Market System and the Circular Flow

Demand, Supply, and Market Equilibrium

Market Failures: Public Goods and Externalities

Governments Role and Government Failure

Elasticity

Utility Maximization

Behavioral Economics

Businesses and the Costs of Production

Pure Competition in the Short Run

Pure Competition in the Long Run

Pure Monopoly

Oligopoly and Strategic Behavior

Technology, Rd, and Efficiency

The Demand for Resources

Wage Determination

Rent, Interest, and Profit

Natural Resource and Energy Economics

Public Finance: Expenditures and Taxes

Antitrust Policy and Regulation

Agriculture: Economics and Policy

Income Inequality, Poverty, and Discrimination

Health Care

Immigration

An Introduction to Macroeconomics

Measuring Domestic Output and National Income

Economic Growth

Business Cycles, Unemployment, and Inflation

Basic Macroeconomic Relationships

The Aggregate Expenditures Model

Aggregate Demand and Aggregate Supply

Fiscal Policy, Deficits, and Debt

Money, Banking, and Financial Institutions

Money Creation

Interest Rates and Monetary Policy

Financial Economics

Extending the Analysis of Aggregate Supply

Current Issues in Macro Theory and Policy

International Trade

The Balance of Payments, Exchange Rates, and Trade Deficits

The Economics of Developing Countries

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