Question 1

In monopolistic competition, firms sell a differentiated product. In perfect competition, firms sell an identical product. How do these markets differ as a result?

Accepted Answer

Because of this difference, firms in mon

Question 2

If a monopolistically competitive firm's marginal cost curve shifts upward, then the amount of output it produces

Accepted Answer

A)  increases. 
B)  stays the same. 
C)  decreases. 
D)  could increase, decrease, or stay the same but more information is needed. 
A)  increases. 
B)  stays the same. 
C)  decreases. 
D)  could increase, decrease, or stay the same but more information is needed.

Question 3

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)  There are barriers to entry. 
C)  Price exceeds average total cost. 
D)  Marginal revenue is less than marginal cost. 
A)  The firm's economic profit equals zero. 
B)  There are barriers to entry. 
C)  Price exceeds average total cost. 
D)  Marginal revenue is less than marginal cost.

Question 4

-If all firms in a monopolistically competitive industry faced the same demand and cost curves pictured in the above figure

Accepted Answer

A)  new firms will enter the industry. 
B)  some firms will exit the industry. 
C)  their economic profit would be zero. 
D)  they would each produce 60 units. 
A)  new firms will enter the industry. 
B)  some firms will exit the industry. 
C)  their economic profit would be zero. 
D)  they would each produce 60 units.

Question 5

"One of the defining features of monopolistic competition is product variety." Is the previous statement correct or incorrect?

Accepted Answer

The statement is correct. In m

Question 6

What is product differentiation? What market structure is characterized by product differentiation?

Accepted Answer

A firm practices product differentiation

Question 7

Monopolistic competition is a market structure in which

Accepted Answer

A)  a small number of firms compete. 
B)  each firm produces an identical product. 
C)  firms compete on product quality, price, and marketing. 
D)  there are barriers to entry. 
A)  a small number of firms compete. 
B)  each firm produces an identical product. 
C)  firms compete on product quality, price, and marketing. 
D)  there are barriers to entry.

Question 8

Advertising by firms in monopolistic competition

Accepted Answer

A)  provides consumers with no useful information. 
B)  does not occur. 
C)  can persuade customers that product differentiation exists. 
D)  wastes resources because the entry of rivals forces firms to be price takers. 
A)  provides consumers with no useful information. 
B)  does not occur. 
C)  can persuade customers that product differentiation exists. 
D)  wastes resources because the entry of rivals forces firms to be price takers.

Question 9

Under monopolistic competition, firms make zero economic profit in the long run and produce at the minimum ATC.

Accepted Answer

A) True 
 B)False

Question 10

In a monopolistically competitive industry

Accepted Answer

A)  firms can make an economic profit in the long run because of barriers to entry. 
B)  the firms can never make an economic profit. 
C)  if firms are making an economic profit, new firms enter the industry. 
D)  firms can make an economic profit in the long run because of product differentiation. 
A)  firms can make an economic profit in the long run because of barriers to entry. 
B)  the firms can never make an economic profit. 
C)  if firms are making an economic profit, new firms enter the industry. 
D)  firms can make an economic profit in the long run because of product differentiation.

Question 11

The market for wheat can be described at perfectly competitive while the market for pizza is better described as monopolistically competitive. Which of the following is a NOT a similarity between perfectly competitive and monopolistically competitive firms?

Accepted Answer

A)  Both monopolistically competitive and perfectly competitive firms produce at their efficient scale. 
B)  Both monopolistically competitive and perfectly competitive firms are free to enter and exit the market. 
C)  Both monopolistically competitive and perfectly competitive firms have a small market share. 
D)  There are a large number of firms in both monopolistically competitive and perfectly competitive markets. 
A)  Both monopolistically competitive and perfectly competitive firms produce at their efficient scale. 
B)  Both monopolistically competitive and perfectly competitive firms are free to enter and exit the market. 
C)  Both monopolistically competitive and perfectly competitive firms have a small market share. 
D)  There are a large number of firms in both monopolistically competitive and perfectly competitive markets.

Question 12

Which of the following statements is CORRECT for a monopolistically competitive firm in the short run?

Accepted Answer

A)  Its total revenue is maximized. 
B)  Its total fixed cost is 0. 
C)  Its marginal cost is equal to its marginal revenue. 
D)  Its price is equal to its marginal cost. 
A)  Its total revenue is maximized. 
B)  Its total fixed cost is 0. 
C)  Its marginal cost is equal to its marginal revenue. 
D)  Its price is equal to its marginal cost.

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, Gap's economic ________ is ________.

Accepted Answer

A)  loss; $8,000 
B)  loss; $13,000 
C)  profit; $7,200 
D)  profit; $13,000 
A)  loss; $8,000 
B)  loss; $13,000 
C)  profit; $7,200 
D)  profit; $13,000

Question 14

-The above figure shows the demand and cost curves for a monopolistically competitive firm in the long run. The maximum economic profit this firm can make equal equals

Accepted Answer

A)  $0. 
B)  $80. 
C)  $120. 
D)  $160. 
A)  $0. 
B)  $80. 
C)  $120. 
D)  $160.

Question 15

-In the above figure, the monopolistically competitive firm produces

Accepted Answer

A)  Q3 and sets the price at P3. 
B)  Q2 and sets the price at P2. 
C)  Q1 and sets the price at P1. 
D)  Q1 and sets the price at P5. 
A)  Q3 and sets the price at P3. 
B)  Q2 and sets the price at P2. 
C)  Q1 and sets the price at P1. 
D)  Q1 and sets the price at P5.

Question 16

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 publisher advertises, its profit maximizing price is

Accepted Answer

A)  $40. 
B)  $50. 
C)  $60. 
D)  $70. 
A)  $40. 
B)  $50. 
C)  $60. 
D)  $70.

Question 17

If a firm spends $600 more on advertising, its goal is for the demand curve for its product to shift ________ and its marginal revenue curve to shift ________.

Accepted Answer

A)  leftward; rightward 
B)  leftward; leftward 
C)  rightward; leftward 
D)  rightward, rightward 
A)  leftward; rightward 
B)  leftward; leftward 
C)  rightward; leftward 
D)  rightward, rightward

Question 18

Suppose that at one of the Talbot's shops, marginal cost of a coat is constant at $150, and total fixed cost is $3,000 a day. The shop maximizes its profit by selling 15 coats a day at $500 per coat. Then the shops nearby increase their advertising. The Talbot shop responds by spending $1,500 a day more on advertising its coats. As a result, its profit-maximizing number of coats sold increases to 25 a day at $400 per coat.
-In the scenario above, as a result of increased advertising, Talbot's markup

Accepted Answer

A)  decreases by $100. 
B)  increases by $50. 
C)  increases by $75. 
D)  decreases by $60. 
A)  decreases by $100. 
B)  increases by $50. 
C)  increases by $75. 
D)  decreases by $60.

Question 19

In monopolistic competition, firms compete on product quality, price and marketing.

Accepted Answer

A) True 
 B)False

Question 20

Shower Power, Inc., a firm in monopolistic competition, produces shower radios. The company's economists know that it can sell no radios at $80, and for each $10 cut in price, the quantity of radios it can sell increases by 50 a day. This relationship continues to hold until the price falls to $20. The firm's total fixed cost is $3,000 a day. Its marginal cost is constant at $20 per radio.
a) Draw the demand curve faced by the firm and its marginal revenue curve. Also draw Shower Power's marginal cost and average total cost curves.
b) What quantity of radios should Shower Power produce to maximize its profit? What price should it charge?
c) What is the firm's short-run economic profit or loss?
d) In the long run, what will happen to the demand for Shower Power's radios, the quantity of radios sold, the price charged, and the firm's economic profit?'

Accepted Answer

@#IMG-DLM& a) The figure above shows Shower Power'

In monopolistic competition, firms sell a differentiated product. In perfect competition, firms sell an identical product. How do these markets differ as a result?

If a monopolistically competitive firm's marginal cost curve shifts upward, then the amount of output it produces

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

-If all firms in a monopolistically competitive industry faced the same demand and cost curves pictured in the above figure

"One of the defining features of monopolistic competition is product variety." Is the previous statement correct or incorrect?

What is product differentiation? What market structure is characterized by product differentiation?

Monopolistic competition is a market structure in which

Advertising by firms in monopolistic competition

Under monopolistic competition, firms make zero economic profit in the long run and produce at the minimum ATC.

In a monopolistically competitive industry

The market for wheat can be described at perfectly competitive while the market for pizza is better described as monopolistically competitive. Which of the following is a NOT a similarity between perfectly competitive and monopolistically competitive firms?

Which of the following statements is CORRECT for a monopolistically competitive firm in the short run?

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's economic is .

-The above figure shows the demand and cost curves for a monopolistically competitive firm in the long run. The maximum economic profit this firm can make equal equals

-In the above figure, the monopolistically competitive firm produces

If a firm spends $600 more on advertising, its goal is for the demand curve for its product to shift and its marginal revenue curve to shift .

In monopolistic competition, firms compete on product quality, price and marketing.

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

In monopolistic competition, firms sell a differentiated product. In perfect competition, firms sell an identical product. How do these markets differ as a result?

If a monopolistically competitive firm's marginal cost curve shifts upward, then the amount of output it produces

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

-If all firms in a monopolistically competitive industry faced the same demand and cost curves pictured in the above figure

"One of the defining features of monopolistic competition is product variety." Is the previous statement correct or incorrect?

What is product differentiation? What market structure is characterized by product differentiation?

Monopolistic competition is a market structure in which

Advertising by firms in monopolistic competition

Under monopolistic competition, firms make zero economic profit in the long run and produce at the minimum ATC.

In a monopolistically competitive industry

The market for wheat can be described at perfectly competitive while the market for pizza is better described as monopolistically competitive. Which of the following is a NOT a similarity between perfectly competitive and monopolistically competitive firms?

Which of the following statements is CORRECT for a monopolistically competitive firm in the short run?

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's economic ________ is ________.

-The above figure shows the demand and cost curves for a monopolistically competitive firm in the long run. The maximum economic profit this firm can make equal equals

-In the above figure, the monopolistically competitive firm produces

If a firm spends $600 more on advertising, its goal is for the demand curve for its product to shift ________ and its marginal revenue curve to shift ________.

In monopolistic competition, firms compete on product quality, price and marketing.

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, Gap's economic is .

If a firm spends $600 more on advertising, its goal is for the demand curve for its product to shift and its marginal revenue curve to shift .