Question 1

If firms in a monopolistically competitive industry are making an economic profit, then definitely there is

Accepted Answer

A)  a leftward shift in each firm's demand curve as new firms enter the market. 
B)  a rightward shift in each firm's marginal revenue curve as new firms enter the market. 
C)  an upward shift in each firm's cost curves as new firms enter the market. 
D)  All of the above answers are correct. 
A)  a leftward shift in each firm's demand curve as new firms enter the market. 
B)  a rightward shift in each firm's marginal revenue curve as new firms enter the market. 
C)  an upward shift in each firm's cost curves as new firms enter the market. 
D)  All of the above answers are correct.

Question 2

In the long-run equilibrium in monopolistic competition, price equals marginal cost.

Accepted Answer

A) True 
 B)False

Question 3

A monopolistically competitive firm and a perfectly competitive firm are alike because both types of firms I. face downward sloping demand curves.
II) have marginal revenue curves that lie beneath their demand curves.
III) can make only zero economic profit in the long run.

Accepted Answer

A)  I and II 
B)  I and III 
C)  III only 
D)  I only 
A)  I and II 
B)  I and III 
C)  III only 
D)  I only

Question 4

When new firms enter a monopolistically competitive industry, each existing firm's

Accepted Answer

A)  demand curve shifts rightward. 
B)  demand curve shifts leftward. 
C)  marginal cost curve shifts rightward. 
D)  marginal cost curve shifts leftward. 
A)  demand curve shifts rightward. 
B)  demand curve shifts leftward. 
C)  marginal cost curve shifts rightward. 
D)  marginal cost curve shifts leftward.

Question 5

Which of the following statements is FALSE concerning monopolistic competition?

Accepted Answer

A)  There are many firms. 
B)  Firms sell a differentiated product. 
C)  Each firm's actions influence rival firms. 
D)  Firms are free to enter and exit. 
A)  There are many firms. 
B)  Firms sell a differentiated product. 
C)  Each firm's actions influence rival firms. 
D)  Firms are free to enter and exit.

Question 6

Brand names are an example of

Accepted Answer

A)  economies of scale. 
B)  product differentiation. 
C)  oligopoly. 
D)  illegal barriers to entry. 
A)  economies of scale. 
B)  product differentiation. 
C)  oligopoly. 
D)  illegal barriers to entry.

Question 7

In the long run, monopolistically competitive firms can make an economic profit because of product differentiation.

Accepted Answer

A) True 
 B)False

Question 8

A firm is said to have excess capacity when it produces the amount of output

Accepted Answer

A)  such that price is greater than marginal cost. 
B)  such that marginal revenue is greater than marginal cost. 
C)  smaller than that which minimizes average total cost. 
D)  larger than that which minimizes average total cost. 
A)  such that price is greater than marginal cost. 
B)  such that marginal revenue is greater than marginal cost. 
C)  smaller than that which minimizes average total cost. 
D)  larger than that which minimizes average total cost.

Question 9

-The firm in the figure above is in monopolistic competition. The firm has

Accepted Answer

A)  no excess capacity. 
B)  excess capacity of 10 units. 
C)  excess capacity of 20 units. 
D)  excess capacity of 30 units. 
A)  no excess capacity. 
B)  excess capacity of 10 units. 
C)  excess capacity of 20 units. 
D)  excess capacity of 30 units.

Question 10

If an industry lacks barriers to entry and each of the many firm faces a demand curve with a negative slope, the industry is

Accepted Answer

A)  perfectly competitive. 
B)  monopolistically competitive. 
C)  an oligopoly. 
D)  a monopoly. 
A)  perfectly competitive. 
B)  monopolistically competitive. 
C)  an oligopoly. 
D)  a monopoly.

Question 11

In monopolistic competition, when firms make an economic profit

Accepted Answer

A)  the existing firms continue to make an economic profit in the long run because of product differentiation. 
B)  new firms enter the industry so that the price falls and the economic profit eventually falls to zero. 
C)  new firms enter the industry so that output decreases and the economic profit increases. 
D)  new firms enter the industry so that output increases and the economic profit increases. 
A)  the existing firms continue to make an economic profit in the long run because of product differentiation. 
B)  new firms enter the industry so that the price falls and the economic profit eventually falls to zero. 
C)  new firms enter the industry so that output decreases and the economic profit increases. 
D)  new firms enter the industry so that output increases and the economic profit increases.

Question 12

Which of the following statements regarding a profit-maximizing monopolistically competitive firm is NOT true?

Accepted Answer

A)  The MR curve lies below the demand curve. 
B)  The firm produces the quantity at which the MR curve intersects the MC curve. 
C)  The MC curve intersects the ATC curve at the ATC curve's lowest point. 
D)  The firm's price equals the price at which the MR curve intersects the MC curve. 
A)  The MR curve lies below the demand curve. 
B)  The firm produces the quantity at which the MR curve intersects the MC curve. 
C)  The MC curve intersects the ATC curve at the ATC curve's lowest point. 
D)  The firm's price equals the price at which the MR curve intersects the MC curve.

Question 13

The figure shows the demand curve for Gap jackets (D), and Gap's marginal revenue curve (MR), marginal cost curve (MC), and average total cost curve (ATC).
-In the figure above, what is Gap's markup?

Accepted Answer

A)  $50 
B)  $15 
C)  $35 
D)  zero 
A)  $50 
B)  $15 
C)  $35 
D)  zero

Question 14

-In the above figure, if the firm is in monopolistic competition, it will produce

Accepted Answer

A)  40 units. 
B)  60 units. 
C)  between 61 and 99 units. 
D)  100 units. 
A)  40 units. 
B)  60 units. 
C)  between 61 and 99 units. 
D)  100 units.

Question 15

A textbook publisher is in monopolistic competition. If the firm spends nothing on advertising, it can sell no books at $100 a book, but for each $10 cut in price, the quantity of books it can sell increases by 20 books a day. The firm's total fixed cost is $2,400 a day. Its average variable cost and marginal cost is a constant $20 per book. If the firm spends $1,200 a day on advertising, it can increase the quantity of books sold at each price by 50 percent. Compared to the situation if it does not advertise, if the firm advertises, its economic profit

Accepted Answer

A)  increases by $400. 
B)  decreases by $400. 
C)  doubles. 
D)  is the same as with no advertising. 
A)  increases by $400. 
B)  decreases by $400. 
C)  doubles. 
D)  is the same as with no advertising.

Question 16

In monopolistic competition, advertising costs

Accepted Answer

A)  are fixed costs. 
B)  are variable costs. 
C)  affect the firm's ATC curve. 
D)  All of the above answers are correct. 
A)  are fixed costs. 
B)  are variable costs. 
C)  affect the firm's ATC curve. 
D)  All of the above answers are correct.

Question 17

The figure shows the demand curve for Gap jackets (D), and Gap's marginal revenue curve (MR), marginal cost curve (MC), and average total cost curve (ATC).
-In the figure above, Gap maximizes its profit if it charges ________ per jacket.

Accepted Answer

A)  $100 
B)  $95 
C)  $75 
D)  $120 
A)  $100 
B)  $95 
C)  $75 
D)  $120

Question 18

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

Accepted Answer

A)  producing 8 units at a price of $5 each. 
B)  producing 8 units at a price of $15 each. 
C)  producing 4 units at a price of $20 each. 
D)  producing 12 units at a price of $10 each. 
A)  producing 8 units at a price of $5 each. 
B)  producing 8 units at a price of $15 each. 
C)  producing 4 units at a price of $20 each. 
D)  producing 12 units at a price of $10 each.

Question 19

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

Accepted Answer

A)  A large number of firms compete. 
B)  Entry and exit is restricted. 
C)  Firms compete on product quality. 
D)  Firms compete on price. 
A)  A large number of firms compete. 
B)  Entry and exit is restricted. 
C)  Firms compete on product quality. 
D)  Firms compete on price.

Question 20

The figure shows the demand curve for Gap jackets (D), and Gap's marginal revenue curve (MR), marginal cost curve (MC), and average total cost curve (ATC).
-In the figure above, the market for jackets ________ in long-run equilibrium, and there is ________ for new firms to enter.

Accepted Answer

A)  is; no incentive 
B)  is; an incentive 
C)  is not; an incentive 
D)  is not; no incentive 
A)  is; no incentive 
B)  is; an incentive 
C)  is not; an incentive 
D)  is not; no incentive

If firms in a monopolistically competitive industry are making an economic profit, then definitely there is

In the long-run equilibrium in monopolistic competition, price equals marginal cost.

A monopolistically competitive firm and a perfectly competitive firm are alike because both types of firms I. face downward sloping demand curves. II) have marginal revenue curves that lie beneath their demand curves. III) can make only zero economic profit in the long run.

When new firms enter a monopolistically competitive industry, each existing firm's

Which of the following statements is FALSE concerning monopolistic competition?

Brand names are an example of

In the long run, monopolistically competitive firms can make an economic profit because of product differentiation.

A firm is said to have excess capacity when it produces the amount of output

-The firm in the figure above is in monopolistic competition. The firm has

If an industry lacks barriers to entry and each of the many firm faces a demand curve with a negative slope, the industry is

In monopolistic competition, when firms make an economic profit

Which of the following statements regarding a profit-maximizing monopolistically competitive firm is NOT true?

The figure shows the demand curve for Gap jackets (D), and Gap's marginal revenue curve (MR), marginal cost curve (MC), and average total cost curve (ATC). -In the figure above, what is Gap's markup?

-In the above figure, if the firm is in monopolistic competition, it will produce

In monopolistic competition, advertising costs

The figure shows the demand curve for Gap jackets (D), and Gap's marginal revenue curve (MR), marginal cost curve (MC), and average total cost curve (ATC). -In the figure above, Gap maximizes its profit if it charges ________ per jacket.

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

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

The figure shows the demand curve for Gap jackets (D), and Gap's marginal revenue curve (MR), marginal cost curve (MC), and average total cost curve (ATC). -In the figure above, the market for jackets in long-run equilibrium, and there is for new firms to enter.

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

If firms in a monopolistically competitive industry are making an economic profit, then definitely there is

In the long-run equilibrium in monopolistic competition, price equals marginal cost.

A monopolistically competitive firm and a perfectly competitive firm are alike because both types of firms I. face downward sloping demand curves. II) have marginal revenue curves that lie beneath their demand curves. III) can make only zero economic profit in the long run.

When new firms enter a monopolistically competitive industry, each existing firm's

Which of the following statements is FALSE concerning monopolistic competition?

Brand names are an example of

In the long run, monopolistically competitive firms can make an economic profit because of product differentiation.

A firm is said to have excess capacity when it produces the amount of output

-The firm in the figure above is in monopolistic competition. The firm has

If an industry lacks barriers to entry and each of the many firm faces a demand curve with a negative slope, the industry is

In monopolistic competition, when firms make an economic profit

Which of the following statements regarding a profit-maximizing monopolistically competitive firm is NOT true?

The figure shows the demand curve for Gap jackets (D), and Gap's marginal revenue curve (MR), marginal cost curve (MC), and average total cost curve (ATC). -In the figure above, what is Gap's markup?

-In the above figure, if the firm is in monopolistic competition, it will produce

In monopolistic competition, advertising costs

The figure shows the demand curve for Gap jackets (D), and Gap's marginal revenue curve (MR), marginal cost curve (MC), and average total cost curve (ATC). -In the figure above, Gap maximizes its profit if it charges ________ per jacket.

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

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

The figure shows the demand curve for Gap jackets (D), and Gap's marginal revenue curve (MR), marginal cost curve (MC), and average total cost curve (ATC). -In the figure above, the market for jackets ________ in long-run equilibrium, and there is ________ for new firms to enter.

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

The figure shows the demand curve for Gap jackets (D), and Gap's marginal revenue curve (MR), marginal cost curve (MC), and average total cost curve (ATC). -In the figure above, the market for jackets in long-run equilibrium, and there is for new firms to enter.