Question 1

In the long-run equilibrium of a monopolistically competitive industry,

Accepted Answer

A) P = minimum ATC. B) P > minimum ATC. C) P = MC. D) P < MC. A) P = minimum ATC. B) P > minimum ATC. C) P = MC. D) P < MC.

Question 2

The demand curve of a monopolistically competitive firm is more elastic than that of a pure monopolist.

Accepted Answer

A) True 
 B)False

Question 3

In the long run, monopolistically competitive firms make normal profits because they are forced to operate at the minimum point on their average total cost curve.

Accepted Answer

A) True 
 B)False

Question 4

In long-run equilibrium, a monopolistically competitive producer achieves

Accepted Answer

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

Question 5

The demand curve faced by a monopolistically competitive firm is more elastic than the monopolist's demand curve.

Accepted Answer

A) True 
 B)False

Question 6

Excess capacity implies

Accepted Answer

A) productive inefficiency. 
B) allocative inefficiency. 
C) productive efficiency. 
D) allocative efficiency. 
A) productive inefficiency. 
B) allocative inefficiency. 
C) productive efficiency. 
D) allocative efficiency.

Question 7

If you sum the squares of the market shares of each firm in an industry (as measured by percent of industry sales), you are calculating the

Accepted Answer

A) four-firm concentration ratio. 
B) Herfindahl index. 
C) degree of collusion. 
D) Lerner index. 
A) four-firm concentration ratio. 
B) Herfindahl index. 
C) degree of collusion. 
D) Lerner index.

Question 8

The monopolistic competition model assumes that

Accepted Answer

A) allocative efficiency will be achieved. 
B) productive efficiency will be achieved. 
C) firms will engage in nonprice competition. 
D) firms will realize economic profits in the long run. 
A) allocative efficiency will be achieved. 
B) productive efficiency will be achieved. 
C) firms will engage in nonprice competition. 
D) firms will realize economic profits in the long run.

Question 9

Monopolistic competition means

Accepted Answer

A) a market situation where competition is based entirely on product differentiation and advertising. 
B) a large number of firms producing a standardized or homogeneous product. 
C) many firms producing differentiated products. 
D) a few firms producing a standardized or homogeneous product. 
A) a market situation where competition is based entirely on product differentiation and advertising. 
B) a large number of firms producing a standardized or homogeneous product. 
C) many firms producing differentiated products. 
D) a few firms producing a standardized or homogeneous product.

Question 10

The Herfindahl index is a measure of the degree of product differentiation in an industry.

Accepted Answer

A) True 
 B)False

Question 11

(Consider This) The main point of the 1987 Wendyâ€™s commercial depicting a Soviet fashion show was to

Accepted Answer

A) show Wendyâ€™s product differentiation from its competitors. 
B) grow its international customer base. 
C) emphasize the efficiency of its production model. 
D) highlight the dependability of its reliable and consistent standardized product. 
A) show Wendyâ€™s product differentiation from its competitors. 
B) grow its international customer base. 
C) emphasize the efficiency of its production model. 
D) highlight the dependability of its reliable and consistent standardized product.

Question 12

A monopolistically competitive firm is producing at a short-run output level where average total cost is $10.00, marginal cost is $5.00, marginal revenue is $6.00, and price is $12.00.In the short run, the firm should

Accepted Answer

A) decrease the level of output. 
B) increase the level of output. 
C) make no change in the level of output. 
D) increase product price. 
A) decrease the level of output. 
B) increase the level of output. 
C) make no change in the level of output. 
D) increase product price.

Question 13

The larger the number of firms in an industry and the less the extent of product differentiation, the greater will be the elasticity of the individual seller's demand curve.

Accepted Answer

A) True 
 B)False

Question 14

An important similarity between a monopolistically competitive firm and a purely competitive firm is that

Accepted Answer

A) both face perfectly elastic demand schedules. 
B) economic profit tends toward zero for both. 
C) both realize productive efficiency. 
D) both realize allocative efficiency. 
A) both face perfectly elastic demand schedules. 
B) economic profit tends toward zero for both. 
C) both realize productive efficiency. 
D) both realize allocative efficiency.

Question 15

Product differentiation in monopolistic competition involves a trade-off between

Accepted Answer

A) productive efficiency and allocative efficiency. 
B) monopoly power and ease of entry. 
C) consumer choice and productive efficiency. 
D) short-run profits and long-run efficiency. 
A) productive efficiency and allocative efficiency. 
B) monopoly power and ease of entry. 
C) consumer choice and productive efficiency. 
D) short-run profits and long-run efficiency.

Question 16

Product variety in monopolistic competition comes at the cost of

Accepted Answer

A) nonprice competition. 
B) barriers to entry. 
C) diminishing returns. 
D) excess capacity. 
A) nonprice competition. 
B) barriers to entry. 
C) diminishing returns. 
D) excess capacity.

Question 17

Long-run equilibrium for a monopolistically competitive firm where economic profits are zero results from

Accepted Answer

A) rising marginal costs. 
B) a perfectly elastic product demand curve. 
C) relatively easy entry. 
D) product differentiation and development. 
A) rising marginal costs. 
B) a perfectly elastic product demand curve. 
C) relatively easy entry. 
D) product differentiation and development.

Question 18

As new firms enter a monopolistically competitive market, the demand curves facing existing firms will tend to shift left.

Accepted Answer

A) True 
 B)False

Question 19

Two industries that have the same four-firm concentration ratio can have significantly different Herfindahl indexes.

Accepted Answer

A) True 
 B)False

Question 20

In the long run, a representative firm in a monopolistically competitive industry will end up

Accepted Answer

A) having an elasticity of demand that will be less than it was in the short run. 
B) having a larger number of competitors than it will in the short run. 
C) producing a level of output at which marginal cost and price are equal. 
D) earning a normal profit, but not an economic profit. 
A) having an elasticity of demand that will be less than it was in the short run. 
B) having a larger number of competitors than it will in the short run. 
C) producing a level of output at which marginal cost and price are equal. 
D) earning a normal profit, but not an economic profit.

Exam 13: Monopolistic Competition

In the long-run equilibrium of a monopolistically competitive industry,

The demand curve of a monopolistically competitive firm is more elastic than that of a pure monopolist.

In the long run, monopolistically competitive firms make normal profits because they are forced to operate at the minimum point on their average total cost curve.

In long-run equilibrium, a monopolistically competitive producer achieves

The demand curve faced by a monopolistically competitive firm is more elastic than the monopolist's demand curve.

Excess capacity implies

If you sum the squares of the market shares of each firm in an industry (as measured by percent of industry sales), you are calculating the

The monopolistic competition model assumes that

Monopolistic competition means

The Herfindahl index is a measure of the degree of product differentiation in an industry.

(Consider This) The main point of the 1987 Wendyâ€™s commercial depicting a Soviet fashion show was to

A monopolistically competitive firm is producing at a short-run output level where average total cost is $10.00, marginal cost is $5.00, marginal revenue is $6.00, and price is $12.00.In the short run, the firm should

The larger the number of firms in an industry and the less the extent of product differentiation, the greater will be the elasticity of the individual seller's demand curve.

An important similarity between a monopolistically competitive firm and a purely competitive firm is that

Product differentiation in monopolistic competition involves a trade-off between

Product variety in monopolistic competition comes at the cost of

Long-run equilibrium for a monopolistically competitive firm where economic profits are zero results from

As new firms enter a monopolistically competitive market, the demand curves facing existing firms will tend to shift left.

Two industries that have the same four-firm concentration ratio can have significantly different Herfindahl indexes.

In the long run, a representative firm in a monopolistically competitive industry will end up

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