Question 1

The graph depicts a monopolistically competitive firm.   In the short run, this monopolistically competitive firm will set the price at

Accepted Answer

A) $55 and produce 45 units of output. 
B) $65 and produce 35 units of output. 
C) $50 and produce 35 units of output. 
D) $52 and produce 50 units of output. 
A) $55 and produce 45 units of output. 
B) $65 and produce 35 units of output. 
C) $50 and produce 35 units of output. 
D) $52 and produce 50 units of output.

Question 2

The monopolistically competitive seller's demand curve will become more elastic the

Accepted Answer

A) more significant the barriers to entering the industry. 
B) greater the degree of product differentiation. 
C) larger the number of competitors. 
D) smaller the number of competitors. 
A) more significant the barriers to entering the industry. 
B) greater the degree of product differentiation. 
C) larger the number of competitors. 
D) smaller the number of competitors.

Question 3

In Wendy's 1987 commercial depicting a Soviet fashion show, one objective was to portray McDonald's and Burger King products as

Accepted Answer

A) all the same and not very appealing. 
B) produced inefficiently. 
C) unpredictable in terms of features and quality. 
D) only appealing to old women. 
A) all the same and not very appealing. 
B) produced inefficiently. 
C) unpredictable in terms of features and quality. 
D) only appealing to old women.

Question 4

Product differentiation is what allows monopolistically competitive firms to have some market power.

Accepted Answer

A) True 
 B)False

Question 5

Long-run equilibrium for a monopolistically competitive firm where economic profits are zero results from

Accepted Answer

A) rising marginal costs. 
B) a perfectly elastic product demand curve. 
C) relatively easy entry. 
D) product differentiation and development. 
A) rising marginal costs. 
B) a perfectly elastic product demand curve. 
C) relatively easy entry. 
D) product differentiation and development.

Question 6

Assume the top six firms comprising an industry have market shares of 10, 8, 8, 5, 5, and 4 percent. The remaining 30 firms each have market shares of 2 percent. The Herfindahl index for this industry is

Accepted Answer

A) 253. 
B) 31. 
C) 414. 
D) 294. 
A) 253. 
B) 31. 
C) 414. 
D) 294.

Question 7

Assume the top six firms comprising an industry have market shares of 21, 17, 16, 11, 9, and 6 percent. The remaining 10 firms each have market shares of 2 percent. The Herfindahl index for this industry is

Accepted Answer

A) 1,107. 
B) 65. 
C) 1,264. 
D) 1,224. 
A) 1,107. 
B) 65. 
C) 1,264. 
D) 1,224.

Question 8

Which is not a common form of nonprice competition in monopolistic competition?

Accepted Answer

A) customer services such as liberal guarantee and repair policies 
B) advertisements featuring brand names 
C) cash rebates and discount coupons 
D) annual design and model changes 
A) customer services such as liberal guarantee and repair policies 
B) advertisements featuring brand names 
C) cash rebates and discount coupons 
D) annual design and model changes

Question 9

If all monopolistically competitive firms in the industry have profit circumstances similar to the firm shown,

Accepted Answer

A) new firms will enter the industry. 
B) some firms will exit the industry. 
C) all firms will exit the industry. 
D) no firms will exit the industry. 
A) new firms will enter the industry. 
B) some firms will exit the industry. 
C) all firms will exit the industry. 
D) no firms will exit the industry.

Question 10

Answer the question on the basis of the following demand and cost data for a specific firm.   Suppose that entry into the industry changes this firm's demand schedule from columns (1)and (3)to columns (2)and (3). Economic profit will

Accepted Answer

A) fall by $10. 
B) fall to $6. 
C) increase by $10. 
D) decline to zero. 
A) fall by $10. 
B) fall to $6. 
C) increase by $10. 
D) decline to zero.

Question 11

One difference between monopolistic competition and pure competition is that

Accepted Answer

A) products may be homogeneous in monopolistic competition. 
B) there is some control over price in monopolistic competition. 
C) monopolistic competition has significant barriers to entry. 
D) firms differentiate their products in pure competition. 
A) products may be homogeneous in monopolistic competition. 
B) there is some control over price in monopolistic competition. 
C) monopolistic competition has significant barriers to entry. 
D) firms differentiate their products in pure competition.

Question 12

Answer the question based on the demand and cost schedules for a monopolistically competitive firm given in the table below.   At the profit-maximizing level of output, marginal revenue is

Accepted Answer

A) $14. 
B) $42. 
C) $10. 
D) $1. 
A) $14. 
B) $42. 
C) $10. 
D) $1.

Question 13

Communist central planners didn't care about product differentiation, opting instead for a uniform design of products in order to achieve

Accepted Answer

A) higher prices and profits for their firms. 
B) mass production and lower costs. 
C) allocative efficiency in society. 
D) purely competitive markets. 
A) higher prices and profits for their firms. 
B) mass production and lower costs. 
C) allocative efficiency in society. 
D) purely competitive markets.

Question 14

Raising the minimum wage in the restaurant industry

Accepted Answer

A) affects mom and pop and chain restaurants about the same. 
B) benefits both mom and pop and chain restaurants by boosting demand. 
C) makes it more difficult for mom and pop restaurants to compete with highly capitalized chain restaurants. 
D) gives mom and pop restaurants a competitive advantage over highly capitalized chain restaurants. 
A) affects mom and pop and chain restaurants about the same. 
B) benefits both mom and pop and chain restaurants by boosting demand. 
C) makes it more difficult for mom and pop restaurants to compete with highly capitalized chain restaurants. 
D) gives mom and pop restaurants a competitive advantage over highly capitalized chain restaurants.

Question 15

The downward-sloping demand curve of a monopolistic competitor

Accepted Answer

A) reflects some level of control over its own price. 
B) becomes eventually horizontal in the long run. 
C) indicates collusion among the members of the product group. 
D) ensures that the firm will produce at minimum average cost in the long run. 
A) reflects some level of control over its own price. 
B) becomes eventually horizontal in the long run. 
C) indicates collusion among the members of the product group. 
D) ensures that the firm will produce at minimum average cost in the long run.

Question 16

The four-firm sales concentration ratio for an industry measures the

Accepted Answer

A) geographic concentration of firms. 
B) extent to which the four largest firms dominate the production of a good. 
C) percentage of the industry's capital facilities owned by the four largest firms. 
D) degree of X-inefficiency in the industry. 
A) geographic concentration of firms. 
B) extent to which the four largest firms dominate the production of a good. 
C) percentage of the industry's capital facilities owned by the four largest firms. 
D) degree of X-inefficiency in the industry.

Question 17

In which of these continuums of degrees of competition (highest to lowest)is monopolistic competition properly placed?

Accepted Answer

A) pure competition, oligopoly, pure monopoly, monopolistic competition 
B) oligopoly, pure competition, monopolistic competition, pure monopoly 
C) monopolistic competition, pure competition, pure monopoly, oligopoly 
D) pure competition, monopolistic competition, oligopoly, pure monopoly 
A) pure competition, oligopoly, pure monopoly, monopolistic competition 
B) oligopoly, pure competition, monopolistic competition, pure monopoly 
C) monopolistic competition, pure competition, pure monopoly, oligopoly 
D) pure competition, monopolistic competition, oligopoly, pure monopoly

Question 18

In the short run, a profit-maximizing monopolistically competitive firm sets it price

Accepted Answer

A) equal to marginal revenue. 
B) equal to marginal cost. 
C) above marginal cost. 
D) below marginal cost. 
A) equal to marginal revenue. 
B) equal to marginal cost. 
C) above marginal cost. 
D) below marginal cost.

Question 19

In long-run equilibrium, both purely competitive and monopolistically competitive firms will

Accepted Answer

A) produce at minimum average total cost. 
B) earn economic profits. 
C) achieve allocative efficiency. 
D) equate marginal cost and marginal revenue. 
A) produce at minimum average total cost. 
B) earn economic profits. 
C) achieve allocative efficiency. 
D) equate marginal cost and marginal revenue.

Question 20

If monopolistically competitive firms in an industry are making an economic profit, then new firms will enter the industry and the product demand facing existing firms will

Accepted Answer

A) increase. 
B) become less elastic. 
C) not be affected. 
D) decrease. 
A) increase. 
B) become less elastic. 
C) not be affected. 
D) decrease.

Exam 13: Monopolistic Competition

The graph depicts a monopolistically competitive firm. In the short run, this monopolistically competitive firm will set the price at

The monopolistically competitive seller's demand curve will become more elastic the

In Wendy's 1987 commercial depicting a Soviet fashion show, one objective was to portray McDonald's and Burger King products as

Product differentiation is what allows monopolistically competitive firms to have some market power.

Long-run equilibrium for a monopolistically competitive firm where economic profits are zero results from

Assume the top six firms comprising an industry have market shares of 10, 8, 8, 5, 5, and 4 percent. The remaining 30 firms each have market shares of 2 percent. The Herfindahl index for this industry is

Assume the top six firms comprising an industry have market shares of 21, 17, 16, 11, 9, and 6 percent. The remaining 10 firms each have market shares of 2 percent. The Herfindahl index for this industry is

Which is not a common form of nonprice competition in monopolistic competition?

If all monopolistically competitive firms in the industry have profit circumstances similar to the firm shown,

Answer the question on the basis of the following demand and cost data for a specific firm. Suppose that entry into the industry changes this firm's demand schedule from columns (1)and (3)to columns (2)and (3). Economic profit will

One difference between monopolistic competition and pure competition is that

Answer the question based on the demand and cost schedules for a monopolistically competitive firm given in the table below. At the profit-maximizing level of output, marginal revenue is

Communist central planners didn't care about product differentiation, opting instead for a uniform design of products in order to achieve

Raising the minimum wage in the restaurant industry

The downward-sloping demand curve of a monopolistic competitor

The four-firm sales concentration ratio for an industry measures the

In which of these continuums of degrees of competition (highest to lowest)is monopolistic competition properly placed?

In the short run, a profit-maximizing monopolistically competitive firm sets it price

In long-run equilibrium, both purely competitive and monopolistically competitive firms will

If monopolistically competitive firms in an industry are making an economic profit, then new firms will enter the industry and the product demand facing existing firms will

Limits, Alternatives, and Choices

The Market System and the Circular Flow

Demand, Supply, and Market Equilibrium

Market Failures Caused by Externalities Asymmetric Information

Public Goods, Public Choice, and Government Failure

Elasticity

Utility Maximization

Behavioral Economics

Businesses and the Costs of Production

Pure Competition in the Short Run

Pure Competition in the Long Run

Pure Monopoly

Oligopoly and Strategic Behavior

Technology, RD, and Efficiency

The Demand for Resources

Wage Determination

Rent, Interest, and Profit

Natural Resource and Energy Economics

Public Finance: Expenditures and Taxes

Antitrust Policy and Regulation

Agriculture: Economics and Policy

Income Inequality, Poverty, and Discrimination

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The Balance of Payments, Exchange Rates, and Trade Deficits

The Economics of Developing Countries

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