Question 1

Which of the following is part of the market structure for monopolistic competition?

Accepted Answer

A)  barriers to entry 
B)  a large number of firms compete 
C)  each firm produces a differentiated product 
D)  Both answers B and C are correct. 
A)  barriers to entry 
B)  a large number of firms compete 
C)  each firm produces a differentiated product 
D)  Both answers B and C are correct.

Question 2

-The above figure shows a firm in monopolistic competition. What price will the firm charge?

Accepted Answer

A)  $12 
B)  $24 
C)  $36 
D)  Between $24 and $36 
A)  $12 
B)  $24 
C)  $36 
D)  Between $24 and $36

Question 3

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 output

Accepted Answer

A)  doubles. 
B)  increases by 40 books per day. 
C)  decreases by 40 books per day. 
D)  is the same as without advertising. 
A)  doubles. 
B)  increases by 40 books per day. 
C)  decreases by 40 books per day. 
D)  is the same as without advertising.

Question 4

-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 markup is

Accepted Answer

A)  more than zero but less than $1.00. 
B)  $3.00. 
C)  $2.00. 
D)  zero. 
A)  more than zero but less than $1.00. 
B)  $3.00. 
C)  $2.00. 
D)  zero.

Question 5

A characteristic of monopolistic competition is

Accepted Answer

A)  there is one firm in the industry. 
B)  each firm is a price taker. 
C)  each firm produces a differentiated product. 
D)  the actions of one firm affect the choices and actions of another firm. 
A)  there is one firm in the industry. 
B)  each firm is a price taker. 
C)  each firm produces a differentiated product. 
D)  the actions of one firm affect the choices and actions of another firm.

Question 6

-The above figure shows the demand and cost curves for a firm in monopolistic competition. The graph represents the firm's situation in

Accepted Answer

A)  only the short run. 
B)  only the long run. 
C)  either the short run or the long run. 
D)  neither the short run nor the long run. 
A)  only the short run. 
B)  only the long run. 
C)  either the short run or the long run. 
D)  neither the short run nor the long run.

Question 7

In its long-run equilibrium, a firm in monopolistic competition

Accepted Answer

A)  makes zero economic profit and operates with excess capacity. 
B)  makes zero economic profit and produces above capacity output. 
C)  makes a positive economic profit and operates with excess capacity. 
D)  makes a positive economic profit and produces above capacity output. 
A)  makes zero economic profit and operates with excess capacity. 
B)  makes zero economic profit and produces above capacity output. 
C)  makes a positive economic profit and operates with excess capacity. 
D)  makes a positive economic profit and produces above capacity output.

Question 8

Monopolistic competition differs from monopoly because in monopolistic competition

Accepted Answer

A)  firms maximize profits. 
B)  firms set marginal revenue equal to marginal cost to maximize profit. 
C)  firms are free to enter and exit. 
D)  All of the above are differences between monopoly and monopolistically competitive firms. 
A)  firms maximize profits. 
B)  firms set marginal revenue equal to marginal cost to maximize profit. 
C)  firms are free to enter and exit. 
D)  All of the above are differences between monopoly and monopolistically competitive firms.

Question 9

-The above figure shows a firm in monopolistic competition. At the profit maximizing level of output, excess capacity for the firm is equal to

Accepted Answer

A)  0 units per day. 
B)  4 units per day. 
C)  8 units per day. 
D)  16 units per day. 
A)  0 units per day. 
B)  4 units per day. 
C)  8 units per day. 
D)  16 units per day.

Question 10

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. If the firm advertises, its maximum economic profit is

Accepted Answer

A)  zero. 
B)  $800. 
C)  $1,200. 
D)  -$400. 
A)  zero. 
B)  $800. 
C)  $1,200. 
D)  -$400.

Question 11

In monopolistic competition, profit is maximized when the amount produced is such that

Accepted Answer

A)  marginal revenue equals marginal cost. 
B)  marginal revenue is greater than marginal cost. 
C)  total revenue equals total cost. 
D)  total revenue is maximized. 
A)  marginal revenue equals marginal cost. 
B)  marginal revenue is greater than marginal cost. 
C)  total revenue equals total cost. 
D)  total revenue is maximized.

Question 12

Firms in monopolistic competition always will

Accepted Answer

A)  make an economic profit. 
B)  set their price equal to their marginal cost. 
C)  set their price above their marginal cost. 
D)  produce at the minimum average total cost. 
A)  make an economic profit. 
B)  set their price equal to their marginal cost. 
C)  set their price above their marginal cost. 
D)  produce at the minimum average total cost.

Question 13

Which of the following is a characteristic of monopolistic competition?

Accepted Answer

A)  many firms 
B)  standardized product 
C)  mutual interdependence 
D)  barriers to entry 
A)  many firms 
B)  standardized product 
C)  mutual interdependence 
D)  barriers to entry

Question 14

In the long run, firms in monopolistic competition have excess capacity.

Accepted Answer

A) True 
 B)False

Question 15

In monopolistic competition, free entry and free exit mean that in the long run firms in the industry make zero economic profit.

Accepted Answer

A) True 
 B)False

Question 16

In monopolistic competition, in the long run customers pay a price that is

Accepted Answer

A)  less than the minimum ATC. 
B)  more than the minimum ATC. 
C)  equal to both the minimum ATC and the minimum AVC. 
D)  equal to the minimum ATC, but not equal to the minimum AVC. 
A)  less than the minimum ATC. 
B)  more than the minimum ATC. 
C)  equal to both the minimum ATC and the minimum AVC. 
D)  equal to the minimum ATC, but not equal to the minimum AVC.

Question 17

If a firm spends $600 more on advertising, its

Accepted Answer

A)  ATC and MC curves shift upward. 
B)  MC curve shifts upward and its ATC curve does not shift. 
C)  ATC curve shifts upward and its MC curve does not shift. 
D)  ATC curve shifts upward and its MC curve shifts downward. 
A)  ATC and MC curves shift upward. 
B)  MC curve shifts upward and its ATC curve does not shift. 
C)  ATC curve shifts upward and its MC curve does not shift. 
D)  ATC curve shifts upward and its MC curve shifts downward.

Question 18

In monopolistic competition, a firm has some ability to affect the price for its product because of

Accepted Answer

A)  easy entry and exit. 
B)  economic profits. 
C)  product differentiation. 
D)  many competitors. 
A)  easy entry and exit. 
B)  economic profits. 
C)  product differentiation. 
D)  many competitors.

Question 19

-In the figure above, assuming that the firm does NOT shut down, the firm will produce

Accepted Answer

A)  fewer than 19 units. 
B)  20 units. 
C)  30 units. 
D)  40 units. 
A)  fewer than 19 units. 
B)  20 units. 
C)  30 units. 
D)  40 units.

Question 20

-The figure above shows the situation facing Smart Digit, Inc., a firm in monopolistic competition that produces calculators. What quantity does the firm produce?

Accepted Answer

A)  200 calculators per day 
B)  300 calculators per day 
C)  more than 300 calculators per day and less than 400 calculators per day 
D)  400 calculators per day 
A)  200 calculators per day 
B)  300 calculators per day 
C)  more than 300 calculators per day and less than 400 calculators per day 
D)  400 calculators per day

Which of the following is part of the market structure for monopolistic competition?

-The above figure shows a firm in monopolistic competition. What price will the firm charge?

A characteristic of monopolistic competition is

-The above figure shows the demand and cost curves for a firm in monopolistic competition. The graph represents the firm's situation in

In its long-run equilibrium, a firm in monopolistic competition

Monopolistic competition differs from monopoly because in monopolistic competition

-The above figure shows a firm in monopolistic competition. At the profit maximizing level of output, excess capacity for the firm is equal to

In monopolistic competition, profit is maximized when the amount produced is such that

Firms in monopolistic competition always will

Which of the following is a characteristic of monopolistic competition?

In the long run, firms in monopolistic competition have excess capacity.

In monopolistic competition, free entry and free exit mean that in the long run firms in the industry make zero economic profit.

In monopolistic competition, in the long run customers pay a price that is

If a firm spends $600 more on advertising, its

In monopolistic competition, a firm has some ability to affect the price for its product because of

-In the figure above, assuming that the firm does NOT shut down, the firm will produce

-The figure above shows the situation facing Smart Digit, Inc., a firm in monopolistic competition that produces calculators. What quantity does the firm produce?

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

Which of the following is part of the market structure for monopolistic competition?

-The above figure shows a firm in monopolistic competition. What price will the firm charge?

A characteristic of monopolistic competition is

-The above figure shows the demand and cost curves for a firm in monopolistic competition. The graph represents the firm's situation in

In its long-run equilibrium, a firm in monopolistic competition

Monopolistic competition differs from monopoly because in monopolistic competition

-The above figure shows a firm in monopolistic competition. At the profit maximizing level of output, excess capacity for the firm is equal to

In monopolistic competition, profit is maximized when the amount produced is such that

Firms in monopolistic competition always will

Which of the following is a characteristic of monopolistic competition?

In the long run, firms in monopolistic competition have excess capacity.

In monopolistic competition, free entry and free exit mean that in the long run firms in the industry make zero economic profit.

In monopolistic competition, in the long run customers pay a price that is

If a firm spends $600 more on advertising, its

In monopolistic competition, a firm has some ability to affect the price for its product because of

-In the figure above, assuming that the firm does NOT shut down, the firm will produce

-The figure above shows the situation facing Smart Digit, Inc., a firm in monopolistic competition that produces calculators. What quantity does the firm produce?

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