Question 1

A firm's markup is the amount by which ________ exceeds ________.

Accepted Answer

A)  price; average total cost 
B)  price; marginal cost 
C)  average total cost; marginal cost 
D)  price; average variable cost 
A)  price; average total cost 
B)  price; marginal cost 
C)  average total cost; marginal cost 
D)  price; average variable cost

Question 2

A monopolistically competitive firm has ________ power to set the price of its product because ________.

Accepted Answer

A)  no; there are no barriers to entry 
B)  some; there are barriers to entry 
C)  no; of product differentiation 
D)  some; of product differentiation 
A)  no; there are no barriers to entry 
B)  some; there are barriers to entry 
C)  no; of product differentiation 
D)  some; of product differentiation

Question 3

Product differentiation exists within an industry if

Accepted Answer

A)  there are no substitutes for a product. 
B)  there are close but not perfect substitutes for a product. 
C)  the firm can sell all it wants at the chosen price. 
D)  there is a monopoly. 
A)  there are no substitutes for a product. 
B)  there are close but not perfect substitutes for a product. 
C)  the firm can sell all it wants at the chosen price. 
D)  there is a monopoly.

Question 4

In monopolistic competition, each firm's marginal revenue curve has a ________ and its demand curve has a ________.

Accepted Answer

A)  slope equal to zero; slope equal to zero 
B)  slope equal to zero; negative slope 
C)  negative slope; a slope equal to zero 
D)  negative slope; negative slope 
A)  slope equal to zero; slope equal to zero 
B)  slope equal to zero; negative slope 
C)  negative slope; a slope equal to zero 
D)  negative slope; negative slope

Question 5

Product variety and information for consumers are gains from

Accepted Answer

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

Question 6

In the long run, a firm in monopolistic competition has its price equal to ________ and also has its price ________.

Accepted Answer

A)  marginal cost; exceeding its average total cost. 
B)  marginal cost; equal to its average total cost 
C)  average total cost; exceeds its marginal cost 
D)  average total cost; less than its marginal cost 
A)  marginal cost; exceeding its average total cost. 
B)  marginal cost; equal to its average total cost 
C)  average total cost; exceeds its marginal cost 
D)  average total cost; less than its marginal cost

Question 7

In the short run, a firm in monopolistic competition produces where P = MC.

Accepted Answer

A) True 
 B)False

Question 8

Because consumers value product variety

Accepted Answer

A)  society must be more efficient with monopolistic competition than with perfect competition. 
B)  the inefficiency and deadweight loss created by monopolistic competition is offset. 
C)  in the long run, monopolistically competitive firms earn an economic profit. 
D)  monopolistically competitive industries are efficient. 
A)  society must be more efficient with monopolistic competition than with perfect competition. 
B)  the inefficiency and deadweight loss created by monopolistic competition is offset. 
C)  in the long run, monopolistically competitive firms earn an economic profit. 
D)  monopolistically competitive industries are efficient.

Question 9

-The above figure shows the demand and cost curves for a firm in monopolistic competition. In the figure, the firm makes an economic profit of

Accepted Answer

A)  $0. 
B)  $20. 
C)  $40. 
D)  $120. 
A)  $0. 
B)  $20. 
C)  $40. 
D)  $120.

Question 10

In monopolistic competition

Accepted Answer

A)  each firm's price cannot deviate from the average price of other firms. 
B)  each firm supplies a large part of the total industry output. 
C)  no one firm's actions directly affect the actions of the other firms. 
D)  firms set their prices based on agreements with their competitors. 
A)  each firm's price cannot deviate from the average price of other firms. 
B)  each firm supplies a large part of the total industry output. 
C)  no one firm's actions directly affect the actions of the other firms. 
D)  firms set their prices based on agreements with their competitors.

Question 11

Which of the following goods is best described as being sold in a monopolistically competitive market?

Accepted Answer

A)  electricity 
B)  wheat 
C)  fast food 
D)  postage stamps 
A)  electricity 
B)  wheat 
C)  fast food 
D)  postage stamps

Question 12

"A firm in monopolistic competition maximizes its profit by producing where its price is equal to its marginal cost." Is the previous statement correct or incorrect?

Accepted Answer

The statement is incorrect. A firm in mo

Question 13

In the long run, all firms in a monopolistically competitive industry make

Accepted Answer

A)  negative accounting profit. 
B)  zero accounting profit. 
C)  an economic profit. 
D)  zero economic profit. 
A)  negative accounting profit. 
B)  zero accounting profit. 
C)  an economic profit. 
D)  zero economic profit.

Question 14

Monopolistically competitive firms increasing their advertising will definitely achieve which of the following?

Accepted Answer

A)  shift their average total cost curve up 
B)  shift their demand curve to the right 
C)  increase their economic profit 
D)  shift their demand curve to the right and shift their average total cost curve up 
A)  shift their average total cost curve up 
B)  shift their demand curve to the right 
C)  increase their economic profit 
D)  shift their demand curve to the right and shift their average total cost curve up

Question 15

-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). If Fresh Taste and other firms in the market are currently producing their profit maximizing quantities of cereals, then the market is

Accepted Answer

A)  in both short-run equilibrium and long-run equilibrium. 
B)  in short-run equilibrium but not in long-run equilibrium. 
C)  in long-run equilibrium but not in short-run equilibrium. 
D)  neither in short-run equilibrium nor in long-run equilibrium. 
A)  in both short-run equilibrium and long-run equilibrium. 
B)  in short-run equilibrium but not in long-run equilibrium. 
C)  in long-run equilibrium but not in short-run equilibrium. 
D)  neither in short-run equilibrium nor in long-run equilibrium.

Question 16

In the long run, a firm in monopolistic competition will

Accepted Answer

A)  make a negative economic profit, that is, an economic loss. 
B)  make zero economic profit, that is, a normal profit. 
C)  make a positive economic profit. 
D)  None of the above answers is necessarily correct because the amount of the profit or loss depends on the slope of the demand curve. 
A)  make a negative economic profit, that is, an economic loss. 
B)  make zero economic profit, that is, a normal profit. 
C)  make a positive economic profit. 
D)  None of the above answers is necessarily correct because the amount of the profit or loss depends on the slope of the demand curve.

Question 17

-The above figure shows a firm in monopolistic competition. At the profit maximizing level of output

Accepted Answer

A)  the firm is making a positive economic profit. 
B)  the firm incurs an economic loss. 
C)  the firm is making zero economic profit. 
D)  this firm would choose to shut down in the short run. 
A)  the firm is making a positive economic profit. 
B)  the firm incurs an economic loss. 
C)  the firm is making zero economic profit. 
D)  this firm would choose to shut down in the short run.

Question 18

When comparing perfect competition and monopolistic competition, we find that

Accepted Answer

A)  firms in monopolistic competition produce identical products just as do firms in perfect competition. 
B)  firms in monopolistic competition face barriers to entry, unlike firms in perfect competition. 
C)  advertising plays a large role in monopolistic competition, unlike in perfect competition. 
D)  firms in monopolistic competition are price takers just as is the case for firms in perfect competition. 
A)  firms in monopolistic competition produce identical products just as do firms in perfect competition. 
B)  firms in monopolistic competition face barriers to entry, unlike firms in perfect competition. 
C)  advertising plays a large role in monopolistic competition, unlike in perfect competition. 
D)  firms in monopolistic competition are price takers just as is the case for firms in perfect competition.

Question 19

ACME, Inc. operates in a market structure in which there are many other firms that find it easy to enter or exit. ACME is operating in ________ market.

Accepted Answer

A)  definitely a perfectly competitive 
B)  either a perfectly competitive or a monopolistically competitive 
C)  definitely a monopolistically competitive 
D)  neither a perfectly competitive nor a monopolistically competitive 
A)  definitely a perfectly competitive 
B)  either a perfectly competitive or a monopolistically competitive 
C)  definitely a monopolistically competitive 
D)  neither a perfectly competitive nor a monopolistically competitive

Question 20

Which of the following is NOT a characteristic of monopolistic competition?

Accepted Answer

A)  many firms 
B)  price taking firms 
C)  advertising 
D)  product differentiation 
A)  many firms 
B)  price taking firms 
C)  advertising 
D)  product differentiation

A firm's markup is the amount by which exceeds .

A monopolistically competitive firm has power to set the price of its product because .

Product differentiation exists within an industry if

In monopolistic competition, each firm's marginal revenue curve has a and its demand curve has a .

Product variety and information for consumers are gains from

In the long run, a firm in monopolistic competition has its price equal to and also has its price .

In the short run, a firm in monopolistic competition produces where P = MC.

Because consumers value product variety

-The above figure shows the demand and cost curves for a firm in monopolistic competition. In the figure, the firm makes an economic profit of

In monopolistic competition

Which of the following goods is best described as being sold in a monopolistically competitive market?

"A firm in monopolistic competition maximizes its profit by producing where its price is equal to its marginal cost." Is the previous statement correct or incorrect?

In the long run, all firms in a monopolistically competitive industry make

Monopolistically competitive firms increasing their advertising will definitely achieve which of the following?

In the long run, a firm in monopolistic competition will

-The above figure shows a firm in monopolistic competition. At the profit maximizing level of output

When comparing perfect competition and monopolistic competition, we find that

ACME, Inc. operates in a market structure in which there are many other firms that find it easy to enter or exit. ACME is operating in ________ market.

Which of the following is NOT a characteristic of monopolistic competition?

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

A firm's markup is the amount by which ________ exceeds ________.

A monopolistically competitive firm has ________ power to set the price of its product because ________.

Product differentiation exists within an industry if

In monopolistic competition, each firm's marginal revenue curve has a ________ and its demand curve has a ________.

Product variety and information for consumers are gains from

In the long run, a firm in monopolistic competition has its price equal to ________ and also has its price ________.

In the short run, a firm in monopolistic competition produces where P = MC.

Because consumers value product variety

-The above figure shows the demand and cost curves for a firm in monopolistic competition. In the figure, the firm makes an economic profit of

In monopolistic competition

Which of the following goods is best described as being sold in a monopolistically competitive market?

"A firm in monopolistic competition maximizes its profit by producing where its price is equal to its marginal cost." Is the previous statement correct or incorrect?

In the long run, all firms in a monopolistically competitive industry make

Monopolistically competitive firms increasing their advertising will definitely achieve which of the following?

In the long run, a firm in monopolistic competition will

-The above figure shows a firm in monopolistic competition. At the profit maximizing level of output

When comparing perfect competition and monopolistic competition, we find that

ACME, Inc. operates in a market structure in which there are many other firms that find it easy to enter or exit. ACME is operating in ________ market.

Which of the following is NOT a characteristic of monopolistic competition?

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

A firm's markup is the amount by which exceeds .

A monopolistically competitive firm has power to set the price of its product because .

In monopolistic competition, each firm's marginal revenue curve has a and its demand curve has a .

In the long run, a firm in monopolistic competition has its price equal to and also has its price .