Question 1

Nonprice competition refers to

Accepted Answer

A) competition between products of different industries, for example, competition between aluminum and steel in the manufacture of automobile parts. 
B) price increases by a firm that are ignored by its rivals. 
C) advertising, product promotion, and changes in the real or perceived characteristics of a product. 
D) reductions in production costs that are not reflected in price reductions. 
A) competition between products of different industries, for example, competition between aluminum and steel in the manufacture of automobile parts. 
B) price increases by a firm that are ignored by its rivals. 
C) advertising, product promotion, and changes in the real or perceived characteristics of a product. 
D) reductions in production costs that are not reflected in price reductions.

Question 2

Product differentiation in a monopolistically competitive market always entails more costs than benefits.

Accepted Answer

A) True 
 B)False

Question 3

That one thing that monopolistic competition provides, which is not assured in the other market structures, is product variety.

Accepted Answer

A) True 
 B)False

Question 4

Other things equal, if more firms enter a monopolistically competitive industry,

Accepted Answer

A) the demand curves facing existing firms would shift to the right. 
B) the demand curves facing existing firms would shift to the left. 
C) the demand curves facing existing firms would become less elastic. 
D) losses would necessarily occur. 
A) the demand curves facing existing firms would shift to the right. 
B) the demand curves facing existing firms would shift to the left. 
C) the demand curves facing existing firms would become less elastic. 
D) losses would necessarily occur.

Question 5

Assume that in a monopolistically competitive industry, firms are earning economic profit.This situation will

Accepted Answer

A) reduce the excess capacity in the industry as firms expand production. 
B) attract other firms to enter the industry, causing the existing firms' profits to shrink. 
C) cause firms to standardize their product to limit the degree of competition. 
D) make the industry allocatively efficient as each firm seeks to maintain its profits. 
A) reduce the excess capacity in the industry as firms expand production. 
B) attract other firms to enter the industry, causing the existing firms' profits to shrink. 
C) cause firms to standardize their product to limit the degree of competition. 
D) make the industry allocatively efficient as each firm seeks to maintain its profits.

Question 6

In long-run equilibrium, both purely competitive and monopolistically competitive firms will

Accepted Answer

A) produce at minimum average total cost. 
B) earn economic profits. 
C) achieve allocative efficiency. 
D) equate marginal cost and marginal revenue. 
A) produce at minimum average total cost. 
B) earn economic profits. 
C) achieve allocative efficiency. 
D) equate marginal cost and marginal revenue.

Question 7

For a monopolistically competitive firm in long-run equilibrium,

Accepted Answer

A) price will equal marginal cost. 
B) price will equal average total cost. 
C) marginal revenue will exceed marginal cost. 
D) price will equal the minimum average total cost. 
A) price will equal marginal cost. 
B) price will equal average total cost. 
C) marginal revenue will exceed marginal cost. 
D) price will equal the minimum average total cost.

Question 8

In the long run, the price charged by a monopolistically competitive firm seeking to maximize profit will

Accepted Answer

A) be less than both MC and ATC. 
B) exceed ATC but equal MC. 
C) exceed MC but equal ATC. 
D) exceed both MC and ATC. 
A) be less than both MC and ATC. 
B) exceed ATC but equal MC. 
C) exceed MC but equal ATC. 
D) exceed both MC and ATC.

Question 9

Product differentiation is what allows monopolistically competitive firms to have some market power.

Accepted Answer

A) True 
 B)False

Question 10

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

Accepted Answer

A) former does not seek to maximize profits. 
B) latter recognizes that price must be reduced to sell more output. 
C) former sells similar, although not identical, products. 
D) former's demand curve is perfectly inelastic. 
A) former does not seek to maximize profits. 
B) latter recognizes that price must be reduced to sell more output. 
C) former sells similar, although not identical, products. 
D) former's demand curve is perfectly inelastic.

Question 11

Which of the following statements is correct? Learning Objective: 13-04 Relate how the ability of monopolistic competition to deliver product differentiation helps to compensate for its failure to deliver economic efficiency.Test Bank: I Topic: Product Variety

Accepted Answer

A) There is a trade-off between product variety and allocative efficiency. 
B) Product variety and allocative efficiency are complementary; increasing one enhances the other. 
C) There is no relationship between product variation and allocative efficiency. 
D) Greater excess capacity reduces firmsâ€™ ability to differentiate products. 
A) There is a trade-off between product variety and allocative efficiency. 
B) Product variety and allocative efficiency are complementary; increasing one enhances the other. 
C) There is no relationship between product variation and allocative efficiency. 
D) Greater excess capacity reduces firmsâ€™ ability to differentiate products.

Question 12

Which of the following assumptions is part of the model of monopolistic competition?

Accepted Answer

A) Firms make identical or homogeneous products. 
B) There is no mutual interdependence among firms. 
C) There are significant barriers to entry into the market. 
D) Firms have no control over their products' prices. 
A) Firms make identical or homogeneous products. 
B) There is no mutual interdependence among firms. 
C) There are significant barriers to entry into the market. 
D) Firms have no control over their products' prices.

Question 13

Monopolistic competition is characterized by excess capacity because

Accepted Answer

A) firms are always profitable in the long run. 
B) firms charge a price that is greater than marginal cost. 
C) firms produce at an output level less than the least-cost output. 
D) the demand for the product is perfectly elastic in this type of industry. 
A) firms are always profitable in the long run. 
B) firms charge a price that is greater than marginal cost. 
C) firms produce at an output level less than the least-cost output. 
D) the demand for the product is perfectly elastic in this type of industry.

Question 14

In the short run, the price charged by a 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) must 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) must be equal to ATC.

Question 15

The amount of excess capacity in pure competition tends to become larger the more elastic the individual firmâ€™s demand curve becomes.

Accepted Answer

A) True 
 B)False

Question 16

In long-run equilibrium, a profit-maximizing firm in a monopolistically competitive industry will produce the quantity of output where

Accepted Answer

A) ATC = P, MR = MC = P. 
B) ATC < P, MR = MC = P. 
C) ATC < P, MR + MC < P. 
D) ATC = P, MR = MC < P. 
A) ATC = P, MR = MC = P. 
B) ATC < P, MR = MC = P. 
C) ATC < P, MR + MC < P. 
D) ATC = P, MR = MC < P.

Question 17

Monopolistic competition is characterized by firms

Accepted Answer

A) producing differentiated products. 
B) making economic profits in the long run. 
C) producing at optimal productive efficiency. 
D) producing where price equals marginal cost. 
A) producing differentiated products. 
B) making economic profits in the long run. 
C) producing at optimal productive efficiency. 
D) producing where price equals marginal cost.

Question 18

In the long run, the economic profits for a monopolistically competitive firm will be

Accepted Answer

A) the same as the profits for a monopolist. 
B) slightly less than the profits of a monopolist. 
C) the same as the profits for a purely competitive firm. 
D) slightly more than the profits of a purely competitive firm. 
A) the same as the profits for a monopolist. 
B) slightly less than the profits of a monopolist. 
C) the same as the profits for a purely competitive firm. 
D) slightly more than the profits of a purely competitive firm.

Question 19

The demand curve of a monopolistically competitive producer is less elastic than that of a purely competitive producer.

Accepted Answer

A) True 
 B)False

Question 20

Monopolistically competitive firms are similar to monopolies in that they have

Accepted Answer

A) high barriers to entry in their industry. 
B) close substitutes for their products. 
C) inelastic demand for their products. 
D) marginal revenues that are less than price. 
A) high barriers to entry in their industry. 
B) close substitutes for their products. 
C) inelastic demand for their products. 
D) marginal revenues that are less than price.

Exam 13: Monopolistic Competition

Nonprice competition refers to

Product differentiation in a monopolistically competitive market always entails more costs than benefits.

That one thing that monopolistic competition provides, which is not assured in the other market structures, is product variety.

Other things equal, if more firms enter a monopolistically competitive industry,

Assume that in a monopolistically competitive industry, firms are earning economic profit.This situation will

In long-run equilibrium, both purely competitive and monopolistically competitive firms will

For a monopolistically competitive firm in long-run equilibrium,

In the long run, the price charged by a monopolistically competitive firm seeking to maximize profit will

Product differentiation is what allows monopolistically competitive firms to have some market power.

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

Which of the following statements is correct? Learning Objective: 13-04 Relate how the ability of monopolistic competition to deliver product differentiation helps to compensate for its failure to deliver economic efficiency.Test Bank: I Topic: Product Variety

Which of the following assumptions is part of the model of monopolistic competition?

Monopolistic competition is characterized by excess capacity because

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

The amount of excess capacity in pure competition tends to become larger the more elastic the individual firmâ€™s demand curve becomes.

In long-run equilibrium, a profit-maximizing firm in a monopolistically competitive industry will produce the quantity of output where

Monopolistic competition is characterized by firms

In the long run, the economic profits for a monopolistically competitive firm will be

The demand curve of a monopolistically competitive producer is less elastic than that of a purely competitive producer.

Monopolistically competitive firms are similar to monopolies in that they have

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

Filters