Question 1

Monopolistic competition is a market structure in which

Accepted Answer

A)  a small number of firms compete. 
B)  firms produce identical products. 
C)  firms compete only on product price. 
D)  firms are free to enter and exit the market. 
A)  a small number of firms compete. 
B)  firms produce identical products. 
C)  firms compete only on product price. 
D)  firms are free to enter and exit the market.

Question 2

Freedom of entry and exit in monopolistic competition

Accepted Answer

A)  means that firms' price and average total cost of producing are always equal. 
B)  never allows firms to earn economic profits. 
C)  leads to falling prices when new firms enter the market. 
D)  forces firms to abandon product differentiation but only in the long run. 
A)  means that firms' price and average total cost of producing are always equal. 
B)  never allows firms to earn economic profits. 
C)  leads to falling prices when new firms enter the market. 
D)  forces firms to abandon product differentiation but only in the long run.

Question 3

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

Accepted Answer

A)  have negatively sloping demand curves. 
B)  can make zero economic profit in the long run. 
C)  have horizontal MR curves. 
D)  are protected by high barriers to entry. 
A)  have negatively sloping demand curves. 
B)  can make zero economic profit in the long run. 
C)  have horizontal MR curves. 
D)  are protected by high barriers to entry.

Question 4

The Karaoke Channel Online streams professional-grade karaoke for $9.95 a month. Suppose Karaoke Channel Online has a constant marginal cost of $1 per customer and total fixed cost is $20,000. The profit maximizing number of customers is 10,000. Several competitors start to advertise online. Karaoke Channel Online now spends $5,000 a month on advertising and the profit maximizing number of customers increases to 12,000. What is Karaoke Channel Online's average total cost before the advertising begins?

Accepted Answer

A)  $3 
B)  $2 
C)  $1 
D)  $2.66 
A)  $3 
B)  $2 
C)  $1 
D)  $2.66

Question 5

In the long run, firms in monopolistic competition become price takers.

Accepted Answer

A) True 
 B)False

Question 6

A monopolistically competitive firm is making a positive economic profit. In the long run, which of the following is most likely?

Accepted Answer

A)  It will produce less output and it will charge a lower price. 
B)  It will produce the same output and charge the same price. 
C)  It will produce less output but keep price the same. 
D)  It will keep output the same but will charge a higher price. 
A)  It will produce less output and it will charge a lower price. 
B)  It will produce the same output and charge the same price. 
C)  It will produce less output but keep price the same. 
D)  It will keep output the same but will charge a higher price.

Question 7

If in monopolistic competition in the short run, firms make ________ profits, then in the long run, new firms will enter the market. The ________ each individual firm's product will ________. In the new long-run equilibrium firms will make ________ profit.

Accepted Answer

A)  economic; demand for; decrease; zero economic 
B)  normal; demand for; increase; zero economic 
C)  economic; supply of; decrease; an economic 
D)  economic; supply of; increase; zero economic 
A)  economic; demand for; decrease; zero economic 
B)  normal; demand for; increase; zero economic 
C)  economic; supply of; decrease; an economic 
D)  economic; supply of; increase; zero economic

Question 8

Explain the role of advertising in monopolistic competition. Describe how advertising by all firms in a monopolistically competitive industry impacts a firm's ATC curve, its MC curve, its demand curve, and its MR curve.

Accepted Answer

In order to maintain (or regain) economi

Question 9

In monopolistic competition, each firm supplies a ________ part of the total market output and its actions ________ the actions of the other firms.

Accepted Answer

A)  small; do not directly affect 
B)  small; directly affect 
C)  large; do not directly affect 
D)  large; directly affect 
A)  small; do not directly affect 
B)  small; directly affect 
C)  large; do not directly affect 
D)  large; directly affect

Question 10

Which of the following is TRUE regarding the long run for a firm in monopolistic competition?

Accepted Answer

A)  The firm's economic profit equals zero. 
B)  Marginal revenue equals marginal cost. 
C)  Price exceeds marginal cost. 
D)  All of the above are true. 
A)  The firm's economic profit equals zero. 
B)  Marginal revenue equals marginal cost. 
C)  Price exceeds marginal cost. 
D)  All of the above are true.

Question 11

Monopolistic competition is a market in which ________ firms produce ________ goods and services.

Accepted Answer

A)  many; identical 
B)  many; differentiated 
C)  few; differentiated 
D)  few; identical 
A)  many; identical 
B)  many; differentiated 
C)  few; differentiated 
D)  few; identical

Question 12

Which of the following is TRUE regarding the long run for a firm in monopolistic competition?

Accepted Answer

A)  P = MC = ATC 
B)  P = MC = MR 
C)  ATC = MC = MR 
D)  P = ATC 
A)  P = MC = ATC 
B)  P = MC = MR 
C)  ATC = MC = MR 
D)  P = ATC

Question 13

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

Accepted Answer

A)  zero 
B)  between $1 and $700 
C)  between $701 and $900 
D)  more than $901 
A)  zero 
B)  between $1 and $700 
C)  between $701 and $900 
D)  more than $901

Question 14

Product differentiation

Accepted Answer

A)  is why a monopolistic competitor faces a downward-sloping demand curve. 
B)  means that the monopolistic competitor's product is a close but not a perfect substitute for the products of its competitors. 
C)  enables the monopolistic competitor to compete in product quality. 
D)  All of the above answers are correct. 
A)  is why a monopolistic competitor faces a downward-sloping demand curve. 
B)  means that the monopolistic competitor's product is a close but not a perfect substitute for the products of its competitors. 
C)  enables the monopolistic competitor to compete in product quality. 
D)  All of the above answers are correct.

Question 15

-The above figure shows the demand and cost curves for a firm in monopolistic competition in the long run. The firm maximizes its profit by

Accepted Answer

A)  producing 4 units and charging a price of $15. 
B)  producing 8 units and charging a price of $5. 
C)  producing 16 units and charging a price of $10. 
D)  producing 8 units and charging a price of $15. 
A)  producing 4 units and charging a price of $15. 
B)  producing 8 units and charging a price of $5. 
C)  producing 16 units and charging a price of $10. 
D)  producing 8 units and charging a price of $15.

Question 16

The Karaoke Channel Online streams professional-grade karaoke for $9.95 a month. Suppose Karaoke Channel Online has a constant marginal cost of $1 per customer and total fixed cost is $20,000. The profit maximizing number of customers is 10,000. Several competitors start to advertise online. Karaoke Channel Online now spends $5,000 a month on advertising and the profit maximizing number of customers increases to 12,000 and the streaming price remains constant. What is Karaoke Channel Online's total profit after the advertising begins?

Accepted Answer

A)  $84,400 
B)  $66,500 
C)  $119,400 
D)  $89,400 
A)  $84,400 
B)  $66,500 
C)  $119,400 
D)  $89,400

Question 17

In monopolistic competition, product differentiation gives the firms the power to set their prices.

Accepted Answer

A) True 
 B)False

Question 18

A monopolistically competitive firm will end up selling its output for a price such that its

Accepted Answer

A)  price is greater than marginal cost. 
B)  price is equal to marginal cost. 
C)  price is equal to marginal revenue. 
D)  price is equal to average total cost. 
A)  price is greater than marginal cost. 
B)  price is equal to marginal cost. 
C)  price is equal to marginal revenue. 
D)  price is equal to average total cost.

Question 19

The figure shows the demand curve for Nike shoes (D), and Nike's marginal revenue curve (MR), marginal cost curve (MC), and average total cost curve (ATC).
-In the figure above, Nike's economic profit is

Accepted Answer

A)  $3,000. 
B)  $1,800. 
C)  $9,000. 
D)  zero. 
A)  $3,000. 
B)  $1,800. 
C)  $9,000. 
D)  zero.

Question 20

The efficient scale of a firm is defined as the point where

Accepted Answer

A)  average total cost is minimized. 
B)  marginal revenue equals marginal cost. 
C)  price equals marginal cost. 
D)  marginal revenue equals zero. 
A)  average total cost is minimized. 
B)  marginal revenue equals marginal cost. 
C)  price equals marginal cost. 
D)  marginal revenue equals zero.

Monopolistic competition is a market structure in which

Freedom of entry and exit in monopolistic competition

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

In the long run, firms in monopolistic competition become price takers.

A monopolistically competitive firm is making a positive economic profit. In the long run, which of the following is most likely?

If in monopolistic competition in the short run, firms make profits, then in the long run, new firms will enter the market. The each individual firm's product will . In the new long-run equilibrium firms will make profit.

Explain the role of advertising in monopolistic competition. Describe how advertising by all firms in a monopolistically competitive industry impacts a firm's ATC curve, its MC curve, its demand curve, and its MR curve.

In monopolistic competition, each firm supplies a part of the total market output and its actions the actions of the other firms.

Which of the following is TRUE regarding the long run for a firm in monopolistic competition?

Monopolistic competition is a market in which firms produce goods and services.

Which of the following is TRUE regarding the long run for a firm in monopolistic competition?

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

Product differentiation

-The above figure shows the demand and cost curves for a firm in monopolistic competition in the long run. The firm maximizes its profit by

In monopolistic competition, product differentiation gives the firms the power to set their prices.

A monopolistically competitive firm will end up selling its output for a price such that its

The figure shows the demand curve for Nike shoes (D), and Nike's marginal revenue curve (MR), marginal cost curve (MC), and average total cost curve (ATC). -In the figure above, Nike's economic profit is

The efficient scale of a firm is defined as the point where

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

Monopolistic competition is a market structure in which

Freedom of entry and exit in monopolistic competition

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

In the long run, firms in monopolistic competition become price takers.

A monopolistically competitive firm is making a positive economic profit. In the long run, which of the following is most likely?

If in monopolistic competition in the short run, firms make ________ profits, then in the long run, new firms will enter the market. The ________ each individual firm's product will ________. In the new long-run equilibrium firms will make ________ profit.

Explain the role of advertising in monopolistic competition. Describe how advertising by all firms in a monopolistically competitive industry impacts a firm's ATC curve, its MC curve, its demand curve, and its MR curve.

In monopolistic competition, each firm supplies a ________ part of the total market output and its actions ________ the actions of the other firms.

Which of the following is TRUE regarding the long run for a firm in monopolistic competition?

Monopolistic competition is a market in which ________ firms produce ________ goods and services.

Which of the following is TRUE regarding the long run for a firm in monopolistic competition?

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

Product differentiation

-The above figure shows the demand and cost curves for a firm in monopolistic competition in the long run. The firm maximizes its profit by

In monopolistic competition, product differentiation gives the firms the power to set their prices.

A monopolistically competitive firm will end up selling its output for a price such that its

The figure shows the demand curve for Nike shoes (D), and Nike's marginal revenue curve (MR), marginal cost curve (MC), and average total cost curve (ATC). -In the figure above, Nike's economic profit is

The efficient scale of a firm is defined as the point where

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

If in monopolistic competition in the short run, firms make profits, then in the long run, new firms will enter the market. The each individual firm's product will . In the new long-run equilibrium firms will make profit.

In monopolistic competition, each firm supplies a part of the total market output and its actions the actions of the other firms.

Monopolistic competition is a market in which firms produce goods and services.