Question 1

Which of the following statements regarding the long run for a profit-maximizing monopolistically competitive firm is FALSE?

Accepted Answer

A)  The firm is making zero economic profit. 
B)  The firm produces the quantity of output for which marginal revenue equals marginal cost. 
C)  The average total cost equals the price. 
D)  The firm produces the quantity at which the marginal revenue curve intersects the demand curve. 
A)  The firm is making zero economic profit. 
B)  The firm produces the quantity of output for which marginal revenue equals marginal cost. 
C)  The average total cost equals the price. 
D)  The firm produces the quantity at which the marginal revenue curve intersects the demand curve.

Question 2

In monopolistic competition, the presence of a large number of firms making a differentiated product means that

Accepted Answer

A)  each firm has some ability to effect the price of its particular good or service. 
B)  each firm must charge the same price. 
C)  the price is established by agreements among the different firms. 
D)  each firm must produce the same quantity. 
A)  each firm has some ability to effect the price of its particular good or service. 
B)  each firm must charge the same price. 
C)  the price is established by agreements among the different firms. 
D)  each firm must produce the same quantity.

Question 3

List four characteristics of monopolistic competition.

Accepted Answer

There are a large number of firms; each

Question 4

Firms in monopolistic competition charge prices that are ________ those of the other firms in the market.

Accepted Answer

A)  close to 
B)  very different from 
C)  the same as 
D)  completely unrelated to 
A)  close to 
B)  very different from 
C)  the same as 
D)  completely unrelated to

Question 5

A firm in monopolistic competition has some degree of price-setting power because

Accepted Answer

A)  in the long run it earns a normal profit. 
B)  it can never earn less than normal profit. 
C)  the price it charges is never more than its marginal cost. 
D)  if it raises its price, the quantity it can sell will not decrease to zero. 
A)  in the long run it earns a normal profit. 
B)  it can never earn less than normal profit. 
C)  the price it charges is never more than its marginal cost. 
D)  if it raises its price, the quantity it can sell will not decrease to zero.

Question 6

A monopolistically competitive firm can increase its economic profit by

Accepted Answer

A)  developing new products. 
B)  producing at the efficient quantity. 
C)  eliminating excess capacity. 
D)  advertising less. 
A)  developing new products. 
B)  producing at the efficient quantity. 
C)  eliminating excess capacity. 
D)  advertising less.

Question 7

-In the above figure, if the firm is in monopolistic competition, its price will be

Accepted Answer

A)  $1. 
B)  $2. 
C)  $3. 
D)  $4. 
A)  $1. 
B)  $2. 
C)  $3. 
D)  $4.

Question 8

A monopolistically competitive firm is like a perfectly competitive firm insofar as

Accepted Answer

A)  both face perfectly elastic demand. 
B)  both make an economic profit in the long run. 
C)  both have MR curves that lie below their demand curves. 
D)  both make zero economic profit in the long run. 
A)  both face perfectly elastic demand. 
B)  both make an economic profit in the long run. 
C)  both have MR curves that lie below their demand curves. 
D)  both make zero economic profit in the long run.

Question 9

A monopolistically competitive firm will always choose to produce where

Accepted Answer

A)  marginal revenue equals marginal cost. 
B)  marginal cost meets the demand curve. 
C)  average total cost meets the demand curve. 
D)  average total cost is minimized. 
A)  marginal revenue equals marginal cost. 
B)  marginal cost meets the demand curve. 
C)  average total cost meets the demand curve. 
D)  average total cost is minimized.

Question 10

Expenditures on advertising

Accepted Answer

A)  can lower average total cost if the advertising increases the quantity sold by a large enough amount. 
B)  cannot lower average total cost because when a firm advertises it increases its costs. 
C)  always lower average total cost because whenever a firm advertises, it increases the quantity sold. 
D)  are variable costs so do not affect the average total cost. 
A)  can lower average total cost if the advertising increases the quantity sold by a large enough amount. 
B)  cannot lower average total cost because when a firm advertises it increases its costs. 
C)  always lower average total cost because whenever a firm advertises, it increases the quantity sold. 
D)  are variable costs so do not affect the average total cost.

Question 11

In monopolistic competition, in the long run firms produce

Accepted Answer

A)  less output than that which minimizes their ATC. 
B)  more output than that which minimizes their ATC. 
C)  the amount of output that minimizes their ATC and their AVC. 
D)  the amount of output that minimizes their ATC but not their AVC. 
A)  less output than that which minimizes their ATC. 
B)  more output than that which minimizes their ATC. 
C)  the amount of output that minimizes their ATC and their AVC. 
D)  the amount of output that minimizes their ATC but not their AVC.

Question 12

Monopolistic competition is a market structure in which

Accepted Answer

A)  a small number of firms compete. 
B)  each firm produces an identical product. 
C)  firms only compete on product price. 
D)  firms are free to enter or exit. 
A)  a small number of firms compete. 
B)  each firm produces an identical product. 
C)  firms only compete on product price. 
D)  firms are free to enter or exit.

Question 13

Firms in monopolistic competition make products that are

Accepted Answer

A)  perfect complements. 
B)  close but not perfect complements. 
C)  perfect substitutes. 
D)  close but not perfect substitutes. 
A)  perfect complements. 
B)  close but not perfect complements. 
C)  perfect substitutes. 
D)  close but not perfect substitutes.

Question 14

In monopolistic competition, product improvement and development

Accepted Answer

A)  are valued by the consumer at an amount equal to the costs the producers have incurred. 
B)  yields a marginal benefit to the producer equal to price of the good. 
C)  is less than its efficient amount. 
D)  None of the above answers are correct. 
A)  are valued by the consumer at an amount equal to the costs the producers have incurred. 
B)  yields a marginal benefit to the producer equal to price of the good. 
C)  is less than its efficient amount. 
D)  None of the above answers are correct.

Question 15

Firms in monopolistic competition can achieve product differentiation by

Accepted Answer

A)  expanding plant size. 
B)  exploiting economies of scale in production. 
C)  advertising special characteristics. 
D)  setting the price equal to average revenue. 
A)  expanding plant size. 
B)  exploiting economies of scale in production. 
C)  advertising special characteristics. 
D)  setting the price equal to average revenue.

Question 16

In monopolistic competition, there are

Accepted Answer

A)  many firms making a differentiated product. 
B)  a few firms making a differentiated product. 
C)  many firms making an identical product. 
D)  a few firms making an identical product. 
A)  many firms making a differentiated product. 
B)  a few firms making a differentiated product. 
C)  many firms making an identical product. 
D)  a few firms making an identical product.

Question 17

Explain how selling costs in monopolistic competition affect the efficiency of monopolistic competition.

Accepted Answer

The additional selling costs from produc

Question 18

In the long-run, a firm in monopolistic competition produces an amount of output that sets

Accepted Answer

A)  P > ATC and MR = MC. 
B)  P > ATC and MR > MC. 
C)  P = ATC and MR = MC. 
D)  P = ATC and MR > MC. 
A)  P > ATC and MR = MC. 
B)  P > ATC and MR > MC. 
C)  P = ATC and MR = MC. 
D)  P = ATC and MR > MC.

Question 19

In monopolistically competitive markets, products are ________ and there ________ barriers to entry.

Accepted Answer

A)  identical; are no 
B)  differentiated; are no 
C)  identical; are 
D)  differentiated; are 
A)  identical; are no 
B)  differentiated; are no 
C)  identical; are 
D)  differentiated; are

Question 20

How does a firm in monopolistic competition determine its price and quantity? What type of profit can it make in the short run and the long run?

Accepted Answer

The firm produces where its marginal cos

Which of the following statements regarding the long run for a profit-maximizing monopolistically competitive firm is FALSE?

In monopolistic competition, the presence of a large number of firms making a differentiated product means that

List four characteristics of monopolistic competition.

Firms in monopolistic competition charge prices that are ________ those of the other firms in the market.

A firm in monopolistic competition has some degree of price-setting power because

A monopolistically competitive firm can increase its economic profit by

-In the above figure, if the firm is in monopolistic competition, its price will be

A monopolistically competitive firm is like a perfectly competitive firm insofar as

A monopolistically competitive firm will always choose to produce where

Expenditures on advertising

In monopolistic competition, in the long run firms produce

Monopolistic competition is a market structure in which

Firms in monopolistic competition make products that are

In monopolistic competition, product improvement and development

Firms in monopolistic competition can achieve product differentiation by

In monopolistic competition, there are

Explain how selling costs in monopolistic competition affect the efficiency of monopolistic competition.

In the long-run, a firm in monopolistic competition produces an amount of output that sets

In monopolistically competitive markets, products are and there barriers to entry.

How does a firm in monopolistic competition determine its price and quantity? What type of profit can it make in the short run and the long run?

What Is Economics

The Economic Problem

Demand and Supply

Elasticity

Efficiency and Equity

Government Actions in Markets

Global Markets in Action

Utility and Demand

Organizing Production

Output and Costs

Perfect Competition

Monopoly

Oligopoly

Public Choices, Public Goods, and Healthcare

Externalities

Markets for Factors of Production

Economic Inequality

Uncertainty and Information

Filters

Exam 14: Monopolistic Competition

Which of the following statements regarding the long run for a profit-maximizing monopolistically competitive firm is FALSE?

In monopolistic competition, the presence of a large number of firms making a differentiated product means that

List four characteristics of monopolistic competition.

Firms in monopolistic competition charge prices that are ________ those of the other firms in the market.

A firm in monopolistic competition has some degree of price-setting power because

A monopolistically competitive firm can increase its economic profit by

-In the above figure, if the firm is in monopolistic competition, its price will be

A monopolistically competitive firm is like a perfectly competitive firm insofar as

A monopolistically competitive firm will always choose to produce where

Expenditures on advertising

In monopolistic competition, in the long run firms produce

Monopolistic competition is a market structure in which

Firms in monopolistic competition make products that are

In monopolistic competition, product improvement and development

Firms in monopolistic competition can achieve product differentiation by

In monopolistic competition, there are

Explain how selling costs in monopolistic competition affect the efficiency of monopolistic competition.

In the long-run, a firm in monopolistic competition produces an amount of output that sets

In monopolistically competitive markets, products are ________ and there ________ barriers to entry.

How does a firm in monopolistic competition determine its price and quantity? What type of profit can it make in the short run and the long run?

What Is Economics

The Economic Problem

Demand and Supply

Elasticity

Efficiency and Equity

Government Actions in Markets

Global Markets in Action

Utility and Demand

Organizing Production

Output and Costs

Perfect Competition

Monopoly

Oligopoly

Public Choices, Public Goods, and Healthcare

Externalities

Markets for Factors of Production

Economic Inequality

Uncertainty and Information

Filters

In monopolistically competitive markets, products are and there barriers to entry.