Question 1

One difference between perfect competition and monopolistic competition is that

Accepted Answer

A)  a perfectly competitive industry has fewer firms. 
B)  in perfect competition, firms produce slightly differentiated products. 
C)  monopolistic competition has barriers to entry. 
D)  firms in monopolistic competition face a downward-sloping demand curve. 
A)  a perfectly competitive industry has fewer firms. 
B)  in perfect competition, firms produce slightly differentiated products. 
C)  monopolistic competition has barriers to entry. 
D)  firms in monopolistic competition face a downward-sloping demand curve.

Question 2

-Fresh Taste, Inc. produces organic breakfast cereals. The market for breakfast cereals is monopolistically competitive. The figure above shows the demand curve that Fresh Taste faces (D), the company's marginal revenue curve (MR), its marginal cost curve (MC), and its average total cost curve (ATC). Fresh Taste's excess capacity is

Accepted Answer

A)  12,000 boxes per day. 
B)  4,000 boxes per day. 
C)  8,000 boxes per day. 
D)  zero. 
A)  12,000 boxes per day. 
B)  4,000 boxes per day. 
C)  8,000 boxes per day. 
D)  zero.

Question 3

In the long run, a firm in a monopolistically competitive industry produces where its marginal cost

Accepted Answer

A)  is less than its average cost. 
B)  equals its average cost. 
C)  exceeds its average cost. 
D)  equals its price. 
A)  is less than its average cost. 
B)  equals its average cost. 
C)  exceeds its average cost. 
D)  equals its price.

Question 4

-The figure above shows the situation facing Smart Digit, Inc., a firm in monopolistic competition that produces calculators. The firm's economic profit in the long run is

Accepted Answer

A)  zero. 
B)  $600. 
C)  $900. 
D)  $2,400. 
A)  zero. 
B)  $600. 
C)  $900. 
D)  $2,400.

Question 5

When firms in monopolistic competition incur an economic loss, some firms will

Accepted Answer

A)  enter the industry and produce more products. 
B)  exit the industry, and demand will increase for the firms that remain. 
C)  exit the industry, and demand will decrease for the firms that remain. 
D)  enter the industry, and demand will become more elastic for the original firms. 
A)  enter the industry and produce more products. 
B)  exit the industry, and demand will increase for the firms that remain. 
C)  exit the industry, and demand will decrease for the firms that remain. 
D)  enter the industry, and demand will become more elastic for the original firms.

Question 6

-In the above figure, the firm is a monopolistically competitive firm. In the long run, its economic profit will be

Accepted Answer

A)  zero. 
B)  between zero and $50 per day. 
C)  greater than $50 per day. 
D)  some amount that cannot be determined without more information. 
A)  zero. 
B)  between zero and $50 per day. 
C)  greater than $50 per day. 
D)  some amount that cannot be determined without more information.

Question 7

Which of the following best explains why monopolistically competitive firms face a downward sloping demand curve while perfectly competitive firms do not?

Accepted Answer

A)  Monopolistically competitive firms sell a differentiated good. 
B)  Monopolistically competitive industries have only a few firms. 
C)  Monopolistically competitive firms have barriers to entry. 
D)  Only industries with free entry and exit have firms that face horizontal demand curves. 
A)  Monopolistically competitive firms sell a differentiated good. 
B)  Monopolistically competitive industries have only a few firms. 
C)  Monopolistically competitive firms have barriers to entry. 
D)  Only industries with free entry and exit have firms that face horizontal demand curves.

Question 8

-The figure above shows the situation facing Smart Digit, Inc., a firm in monopolistic competition that produces calculators. What is the firm's profit-maximizing price?

Accepted Answer

A)  $12 
B)  $10 
C)  $8 
D)  $4 
A)  $12 
B)  $10 
C)  $8 
D)  $4

Question 9

In monopolistic competition, excess capacity results from

Accepted Answer

A)  the presence of a large number of buyers. 
B)  the mobility of firms into and out of the industry. 
C)  imperfect information about price. 
D)  product differentiation. 
A)  the presence of a large number of buyers. 
B)  the mobility of firms into and out of the industry. 
C)  imperfect information about price. 
D)  product differentiation.

Question 10

Why are selling costs high in monopolistic competition?

Accepted Answer

In monopolistic competition, there are a

Question 11

"It is clear from the theory of monopolistic competition that product development is not pushed to its efficient level." This statement is

Accepted Answer

A)  false because there is so much product differentiation in monopolistic competition. 
B)  true because there is little incentive to innovate in monopolistic competition. 
C)  false because there are so many wasteful innovations in monopolistic competition that are merely cosmetic. 
D)  true because price exceeds marginal revenue in monopolistic competition. 
A)  false because there is so much product differentiation in monopolistic competition. 
B)  true because there is little incentive to innovate in monopolistic competition. 
C)  false because there are so many wasteful innovations in monopolistic competition that are merely cosmetic. 
D)  true because price exceeds marginal revenue in monopolistic competition.

Question 12

Which one of the following statements is TRUE for both perfect competition and monopolistic competition?

Accepted Answer

A)  Each type of firm faces a downward sloping demand curve. 
B)  Each type of firm produces a homogeneous product. 
C)  In the long run, firms in both industries make zero economic profit. 
D)  Each type of firm competes on product quality and price. 
A)  Each type of firm faces a downward sloping demand curve. 
B)  Each type of firm produces a homogeneous product. 
C)  In the long run, firms in both industries make zero economic profit. 
D)  Each type of firm competes on product quality and price.

Question 13

Agave, Six Feet Under, Globe, Silk, Sotto Sotto and Zocalo are all restaurants in Atlanta. In the short run, Globe could I. make an economic profit.
II) make zero economic profit.
III) incur an economic loss.

Accepted Answer

A)  Only I 
B)  Only II 
C)  I, II, and III 
D)  Only I and II 
A)  Only I 
B)  Only II 
C)  I, II, and III 
D)  Only I and II

Question 14

A monopolistically competitive firm

Accepted Answer

A)  cannot make a positive economic profit in the long run because of entry. 
B)  can make a positive economic profit in the long run because it sells a differentiated good. 
C)  can make a positive economic profit in the long run because there are only a few firms in the industry. 
D)  cannot make a positive economic profit in the long run because it sells a homogeneous good. 
A)  cannot make a positive economic profit in the long run because of entry. 
B)  can make a positive economic profit in the long run because it sells a differentiated good. 
C)  can make a positive economic profit in the long run because there are only a few firms in the industry. 
D)  cannot make a positive economic profit in the long run because it sells a homogeneous good.

Question 15

How is a monopolistically competitive firm similar to a perfectly competitive firm?

Accepted Answer

A)  Both will observe entry into the industry if economic profit is positive. 
B)  Both produce where average total cost equals marginal cost. 
C)  Both make a positive economic profit in the long run. 
D)  Both produce a homogeneous good. 
A)  Both will observe entry into the industry if economic profit is positive. 
B)  Both produce where average total cost equals marginal cost. 
C)  Both make a positive economic profit in the long run. 
D)  Both produce a homogeneous good.

Question 16

Lee, J Brand, Joe's Jeans, Paper Denim & Cloth, Levi's, Wrangler, and many others are all producers of jeans. In what type of market does Lee operate?

Accepted Answer

A)  monopolistic competition 
B)  monopoly 
C)  oligopoly 
D)  perfect competition 
A)  monopolistic competition 
B)  monopoly 
C)  oligopoly 
D)  perfect competition

Question 17

-In the figure above, assuming that the firm does NOT shut down, it will charge a price of

Accepted Answer

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

Question 18

In the long run, monopolistically competitive firms make zero economic profits because of government regulations.

Accepted Answer

A) True 
 B)False

Question 19

Why are firms in monopolistic competition unable to make an economic profit in the long run?

Accepted Answer

While firms in monopolistic competition

Question 20

A monopolistically competitive firm has excess capacity because in the

Accepted Answer

A)  short run its MR exceeds its MC. 
B)  short run its ATC is less than its AVC. 
C)  long run its ATC exceeds its minimum ATC. 
D)  long run it makes an economic profit. 
A)  short run its MR exceeds its MC. 
B)  short run its ATC is less than its AVC. 
C)  long run its ATC exceeds its minimum ATC. 
D)  long run it makes an economic profit.

One difference between perfect competition and monopolistic competition is that

In the long run, a firm in a monopolistically competitive industry produces where its marginal cost

-The figure above shows the situation facing Smart Digit, Inc., a firm in monopolistic competition that produces calculators. The firm's economic profit in the long run is

When firms in monopolistic competition incur an economic loss, some firms will

-In the above figure, the firm is a monopolistically competitive firm. In the long run, its economic profit will be

Which of the following best explains why monopolistically competitive firms face a downward sloping demand curve while perfectly competitive firms do not?

-The figure above shows the situation facing Smart Digit, Inc., a firm in monopolistic competition that produces calculators. What is the firm's profit-maximizing price?

In monopolistic competition, excess capacity results from

Why are selling costs high in monopolistic competition?

"It is clear from the theory of monopolistic competition that product development is not pushed to its efficient level." This statement is

Which one of the following statements is TRUE for both perfect competition and monopolistic competition?

Agave, Six Feet Under, Globe, Silk, Sotto Sotto and Zocalo are all restaurants in Atlanta. In the short run, Globe could I. make an economic profit. II) make zero economic profit. III) incur an economic loss.

A monopolistically competitive firm

How is a monopolistically competitive firm similar to a perfectly competitive firm?

Lee, J Brand, Joe's Jeans, Paper Denim & Cloth, Levi's, Wrangler, and many others are all producers of jeans. In what type of market does Lee operate?

-In the figure above, assuming that the firm does NOT shut down, it will charge a price of

In the long run, monopolistically competitive firms make zero economic profits because of government regulations.

Why are firms in monopolistic competition unable to make an economic profit in the long run?

A monopolistically competitive firm has excess capacity because in the

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

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Exam 14: Monopolistic Competition

One difference between perfect competition and monopolistic competition is that

In the long run, a firm in a monopolistically competitive industry produces where its marginal cost

-The figure above shows the situation facing Smart Digit, Inc., a firm in monopolistic competition that produces calculators. The firm's economic profit in the long run is

When firms in monopolistic competition incur an economic loss, some firms will

-In the above figure, the firm is a monopolistically competitive firm. In the long run, its economic profit will be

Which of the following best explains why monopolistically competitive firms face a downward sloping demand curve while perfectly competitive firms do not?

-The figure above shows the situation facing Smart Digit, Inc., a firm in monopolistic competition that produces calculators. What is the firm's profit-maximizing price?

In monopolistic competition, excess capacity results from

Why are selling costs high in monopolistic competition?

"It is clear from the theory of monopolistic competition that product development is not pushed to its efficient level." This statement is

Which one of the following statements is TRUE for both perfect competition and monopolistic competition?

Agave, Six Feet Under, Globe, Silk, Sotto Sotto and Zocalo are all restaurants in Atlanta. In the short run, Globe could I. make an economic profit. II) make zero economic profit. III) incur an economic loss.

A monopolistically competitive firm

How is a monopolistically competitive firm similar to a perfectly competitive firm?

Lee, J Brand, Joe's Jeans, Paper Denim & Cloth, Levi's, Wrangler, and many others are all producers of jeans. In what type of market does Lee operate?

-In the figure above, assuming that the firm does NOT shut down, it will charge a price of

In the long run, monopolistically competitive firms make zero economic profits because of government regulations.

Why are firms in monopolistic competition unable to make an economic profit in the long run?

A monopolistically competitive firm has excess capacity because in the

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