Question 1

If the market demand in a monopolistically competitive industry increases, a likely result in the long run will be

Accepted Answer

A)  less elastic demand curves facing each firm. 
B)  a higher ratio of price to average cost. 
C)  a larger number of firms producing a similar product. 
D)  a transition from monopolistic competition to oligopoly. 
A)  less elastic demand curves facing each firm. 
B)  a higher ratio of price to average cost. 
C)  a larger number of firms producing a similar product. 
D)  a transition from monopolistic competition to oligopoly.

Question 2

One important difference between monopoly and monopolistic competition is the

Accepted Answer

A)  slope of the demand curve that the firms faces. 
B)  point there are no barriers to entry in monopolistic competition. 
C)  greater restriction of output in monopolistic competition. 
D)  result that the marginal revenue and demand curves are the same for a monopoly. 
A)  slope of the demand curve that the firms faces. 
B)  point there are no barriers to entry in monopolistic competition. 
C)  greater restriction of output in monopolistic competition. 
D)  result that the marginal revenue and demand curves are the same for a monopoly.

Question 3

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

Accepted Answer

A)  The firm can make an economic profit because of product differentiation. 
B)  Marginal cost equals average total cost. 
C)  Output is produced at minimum average total cost. 
D)  Price equals average total cost. 
A)  The firm can make an economic profit because of product differentiation. 
B)  Marginal cost equals average total cost. 
C)  Output is produced at minimum average total cost. 
D)  Price equals average total cost.

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 after the advertising begins?

Accepted Answer

A)  $3.08 
B)  $3 
C)  $2.08 
D)  $2.50 
A)  $3.08 
B)  $3 
C)  $2.08 
D)  $2.50

Question 5

Dole Co. operates in a monopolistically competitive market. Which of the following characterizes Dole Co.'s market?

Accepted Answer

A)  Dole Co. supplies a small portion of the market's output. 
B)  Dole Co.'s product is slightly different from its competitors. 
C)  Dole Co. faced no barrier to entry when it decided to enter its market. 
D)  All of the above describe Dole Co.'s market. 
A)  Dole Co. supplies a small portion of the market's output. 
B)  Dole Co.'s product is slightly different from its competitors. 
C)  Dole Co. faced no barrier to entry when it decided to enter its market. 
D)  All of the above describe Dole Co.'s market.

Question 6

In monopolistic competition, each firm has a demand curve with a ________ and there ________ barriers to entry into the market.

Accepted Answer

A)  negative slope; are no 
B)  slope equal to zero; are no 
C)  negative slope; are 
D)  slope equal to zero; are 
A)  negative slope; are no 
B)  slope equal to zero; are no 
C)  negative slope; are 
D)  slope equal to zero; are

Question 7

-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 produces ________ thousand boxes of cereals per day and sets a price of ________ a box.

Accepted Answer

A)  12; between $3.00 and $2.01 
B)  8; $1.00 
C)  8; $3.00 
D)  12; $2.00 
A)  12; between $3.00 and $2.01 
B)  8; $1.00 
C)  8; $3.00 
D)  12; $2.00

Question 8

Which of the following is NOT true of firms in monopolistic competition?

Accepted Answer

A)  They are price takers. 
B)  They practice product differentiation. 
C)  They have excess capacity in the long run. 
D)  They earn a normal profit in the long run. 
A)  They are price takers. 
B)  They practice product differentiation. 
C)  They have excess capacity in the long run. 
D)  They earn a normal profit in the long run.

Question 9

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. The firm will

Accepted Answer

A)  advertise because advertising will increase its economic profit. 
B)  not advertise because advertising will lower its economic profit. 
C)  advertise because advertising will decrease its economic loss. 
D)  not advertise because advertising will increase its economic loss. 
A)  advertise because advertising will increase its economic profit. 
B)  not advertise because advertising will lower its economic profit. 
C)  advertise because advertising will decrease its economic loss. 
D)  not advertise because advertising will increase its economic loss.

Question 10

A product that is a close substitute but not a perfect substitute for the products of the other firms is called

Accepted Answer

A)  a homogeneous product. 
B)  an efficient product. 
C)  a differentiated product. 
D)  an inelastic product. 
A)  a homogeneous product. 
B)  an efficient product. 
C)  a differentiated product. 
D)  an inelastic product.

Question 11

A monopolistically competitive industry has

Accepted Answer

A)  significant barriers to entry. 
B)  differentiated products. 
C)  mutually dependent firms. 
D)  a small number of large firms. 
A)  significant barriers to entry. 
B)  differentiated products. 
C)  mutually dependent firms. 
D)  a small number of large firms.

Question 12

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, if the market for jackets were perfectly competitive, in long-run equilibrium, each firm would sell ________ jackets per day at ________ per jacket.

Accepted Answer

A)  132; $122 
B)  100; $130 
C)  100; $80 
D)  128; $114 
A)  132; $122 
B)  100; $130 
C)  100; $80 
D)  128; $114

Question 13

Monopolistic competition is a market structure in which

Accepted Answer

A)  a small number of firms compete. 
B)  each firm produces a differentiated product. 
C)  firms only compete on product price. 
D)  there are barriers to entry. 
A)  a small number of firms compete. 
B)  each firm produces a differentiated product. 
C)  firms only compete on product price. 
D)  there are barriers to entry.

Question 14

What type of profit can a firm in monopolistic competition make in the long run? Explain your answer.

Accepted Answer

In the long run, a firm in monopolistic

Question 15

Monopolistic competition is a market structure in which

Accepted Answer

A)  a large number of firms compete. 
B)  firms produce identical products. 
C)  firms compete only on product price. 
D)  natural or legal barriers prevent the entry of new firms. 
A)  a large number of firms compete. 
B)  firms produce identical products. 
C)  firms compete only on product price. 
D)  natural or legal barriers prevent the entry of new firms.

Question 16

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 maximizes its profit if it sells ________ pairs of shoes per day.

Accepted Answer

A)  120 
B)  87 
C)  137 
D)  150 
A)  120 
B)  87 
C)  137 
D)  150

Question 17

In the long run, monopolistically competitive firms make zero economic profit because of

Accepted Answer

A)  excess capacity. 
B)  product variety. 
C)  easy entry and exit. 
D)  government regulation. 
A)  excess capacity. 
B)  product variety. 
C)  easy entry and exit. 
D)  government regulation.

Question 18

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, the profit-maximizing price

Accepted Answer

A)  rises by $10. 
B)  falls by $10. 
C)  rises by $5. 
D)  does not change. 
A)  rises by $10. 
B)  falls by $10. 
C)  rises by $5. 
D)  does not change.

Question 19

At a monopolistically competitive firm's current level of product development, marginal revenue of product development is greater than its marginal cost. The firm will

Accepted Answer

A)  sell only new products. 
B)  increase product development only if the consumer benefits. 
C)  decrease product development. 
D)  increase product development. 
A)  sell only new products. 
B)  increase product development only if the consumer benefits. 
C)  decrease product development. 
D)  increase product development.

Question 20

What do demand and marginal revenue curves look like in monopolistic competition? How do they compare to the demand and marginal revenue curves in perfect competition and monopoly?

Accepted Answer

In monopolistic competition, the product

If the market demand in a monopolistically competitive industry increases, a likely result in the long run will be

One important difference between monopoly and monopolistic competition is the

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

Dole Co. operates in a monopolistically competitive market. Which of the following characterizes Dole Co.'s market?

In monopolistic competition, each firm has a demand curve with a and there barriers to entry into the market.

Which of the following is NOT true of firms in monopolistic competition?

A product that is a close substitute but not a perfect substitute for the products of the other firms is called

A monopolistically competitive industry has

Monopolistic competition is a market structure in which

What type of profit can a firm in monopolistic competition make in the long run? Explain your answer.

Monopolistic competition is a market structure in which

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 maximizes its profit if it sells ________ pairs of shoes per day.

In the long run, monopolistically competitive firms make zero economic profit because of

At a monopolistically competitive firm's current level of product development, marginal revenue of product development is greater than its marginal cost. The firm will

What do demand and marginal revenue curves look like in monopolistic competition? How do they compare to the demand and marginal revenue curves in perfect competition and monopoly?

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 the market demand in a monopolistically competitive industry increases, a likely result in the long run will be

One important difference between monopoly and monopolistic competition is the

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

Dole Co. operates in a monopolistically competitive market. Which of the following characterizes Dole Co.'s market?

In monopolistic competition, each firm has a demand curve with a ________ and there ________ barriers to entry into the market.

Which of the following is NOT true of firms in monopolistic competition?

A product that is a close substitute but not a perfect substitute for the products of the other firms is called

A monopolistically competitive industry has

Monopolistic competition is a market structure in which

What type of profit can a firm in monopolistic competition make in the long run? Explain your answer.

Monopolistic competition is a market structure in which

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 maximizes its profit if it sells ________ pairs of shoes per day.

In the long run, monopolistically competitive firms make zero economic profit because of

At a monopolistically competitive firm's current level of product development, marginal revenue of product development is greater than its marginal cost. The firm will

What do demand and marginal revenue curves look like in monopolistic competition? How do they compare to the demand and marginal revenue curves in perfect competition and monopoly?

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 monopolistic competition, each firm has a demand curve with a and there barriers to entry into the market.