Question 1

The graph depicts a monopolistically competitive firm.   This monopolistically competitive firm is earning economic profits in the short run and

Accepted Answer

A) will continue to have economic profits in the long run. 
B) will earn only normal profits in the long run. 
C) this will cause its demand curve to shift to the right in the long run. 
D) this will cause its cost curves to rise in the long run. 
A) will continue to have economic profits in the long run. 
B) will earn only normal profits in the long run. 
C) this will cause its demand curve to shift to the right in the long run. 
D) this will cause its cost curves to rise in the long run.

Question 2

Which statement concerning monopolistic competition is false?

Accepted Answer

A) In the long run P = ATC > MC. 
B) Firms may experience losses in the short run. 
C) Firms differentiate their products, but the products are relatively substitutable. 
D) Firms may experience positive economic profits in the long run. 
A) In the long run P = ATC > MC. 
B) Firms may experience losses in the short run. 
C) Firms differentiate their products, but the products are relatively substitutable. 
D) Firms may experience positive economic profits in the long run.

Question 3

Assume that the short-run cost and demand data given in the tables below confront a monopolistic competitor selling a given product and engaged in a given amount of product promotion.   What will the maximum total profits be?

Accepted Answer

A) $65 
B) $90 
C) $85 
D) $110 
A) $65 
B) $90 
C) $85 
D) $110

Question 4

Refer to the diagram for a monopolistically competitive firm. Long-run equilibrium output will be

Accepted Answer

A) greater than E. 
B) E. 
C) D. 
D) C. 
A) greater than E. 
B) E. 
C) D. 
D) C.

Question 5

In the long run, a representative firm in a monopolistically competitive industry will end up

Accepted Answer

A) having an elasticity of demand that will be less than it was in the short run. 
B) having a larger number of competitors than it will in the short run. 
C) producing a level of output at which marginal cost and price are equal. 
D) earning a normal profit, but not an economic profit. 
A) having an elasticity of demand that will be less than it was in the short run. 
B) having a larger number of competitors than it will in the short run. 
C) producing a level of output at which marginal cost and price are equal. 
D) earning a normal profit, but not an economic profit.

Question 6

Refer to the above graphs. The long-run equilibrium for a monopolistically competitive firm is represented by graph

Accepted Answer

A) A. 
B) B. 
C) C. 
D) D. 
A) A. 
B) B. 
C) C. 
D) D.

Question 7

The demand curve of a monopolistically competitive producer is

Accepted Answer

A) less elastic than that of either a pure monopolist or a pure competitor. 
B) less elastic than that of a pure monopolist, but more elastic than that of a pure competitor. 
C) more elastic than that of a pure monopolist, but less elastic than that of a pure competitor. 
D) more elastic than that of either a pure monopolist or a pure competitor. 
A) less elastic than that of either a pure monopolist or a pure competitor. 
B) less elastic than that of a pure monopolist, but more elastic than that of a pure competitor. 
C) more elastic than that of a pure monopolist, but less elastic than that of a pure competitor. 
D) more elastic than that of either a pure monopolist or a pure competitor.

Question 8

The Herfindahl index for a pure monopolist is

Accepted Answer

A) 100. 
B) 10,000. 
C) 100,000. 
D) 10. 
A) 100. 
B) 10,000. 
C) 100,000. 
D) 10.

Question 9

That one thing that monopolistic competition provides, which is not assured in the other market structures, is product variety.

Accepted Answer

A) True 
 B)False

Question 10

Refer to the data. The four-firm concentration ratio for this industry is

Accepted Answer

A) 70 percent. 
B) 85 percent. 
C) 100 percent. 
D) indeterminate because we don't know which four firms are included. 
A) 70 percent. 
B) 85 percent. 
C) 100 percent. 
D) indeterminate because we don't know which four firms are included.

Question 11

Suppose that total sales in an industry in a particular year are $800 million and sales by the top four sellers are $50 million, $40 million, $30 million, and $30 million, respectively. We can conclude that

Accepted Answer

A) allocative efficiency will be achieved. 
B) this industry is monopolistically competitive. 
C) the concentration ratio is 25 percent. 
D) firms in this industry likely collude with each other. 
A) allocative efficiency will be achieved. 
B) this industry is monopolistically competitive. 
C) the concentration ratio is 25 percent. 
D) firms in this industry likely collude with each other.

Question 12

Assume that the short-run cost and demand data given in the tables below confront a monopolistic competitor selling a given product and engaged in a given amount of product promotion.   What output and price levels will maximize the firm's profit in the short run?

Accepted Answer

A) 3 units and $45 
B) 4 units and $40 
C) 5 units and $35 
D) 6 units and $30 
A) 3 units and $45 
B) 4 units and $40 
C) 5 units and $35 
D) 6 units and $30

Question 13

Monopolistic competition is characterized by firms

Accepted Answer

A) producing differentiated products. 
B) making economic profits in the long run. 
C) producing at optimal productive efficiency. 
D) producing where price equals marginal cost. 
A) producing differentiated products. 
B) making economic profits in the long run. 
C) producing at optimal productive efficiency. 
D) producing where price equals marginal cost.

Question 14

In which industry is monopolistic competition most likely to be found?

Accepted Answer

A) utilities 
B) agriculture 
C) retail trade 
D) mining 
A) utilities 
B) agriculture 
C) retail trade 
D) mining

Question 15

Monopolistically competitive and purely competitive industries are similar in that

Accepted Answer

A) both are assured of short-run economic profits. 
B) both produce differentiated products. 
C) the demand curves facing individual firms are perfectly elastic in both industries. 
D) there are few, if any, barriers to entry. 
A) both are assured of short-run economic profits. 
B) both produce differentiated products. 
C) the demand curves facing individual firms are perfectly elastic in both industries. 
D) there are few, if any, barriers to entry.

Question 16

Which of the following characteristics provide a monopolistically competitive firm some monopoly power?

Accepted Answer

A) significant barriers to entry into the industry 
B) product differentiation 
C) a low concentration ratio in the industry 
D) price discrimination 
A) significant barriers to entry into the industry 
B) product differentiation 
C) a low concentration ratio in the industry 
D) price discrimination

Question 17

As new firms enter a monopolistically competitive market, the demand curves facing existing firms will tend to shift left.

Accepted Answer

A) True 
 B)False

Question 18

What are four-firm concentration ratios? How do economists use them to define monopolistically competitive industries?

Accepted Answer

Economists measure the degree of industr

Question 19

Refer to the above graph of a representative firm in monopolistic competition. If curve (2)represents ATC and line (3)represents demand, then we can conclude that the industry

Accepted Answer

A) has positive economic profits. 
B) is in long-run equilibrium. 
C) will contract in the long run. 
D) is not maximizing profits. 
A) has positive economic profits. 
B) is in long-run equilibrium. 
C) will contract in the long run. 
D) is not maximizing profits.

Question 20

Which of the following forces does not play a major part in the adjustments of a monopolistically competitive industry toward its long-run equilibrium?

Accepted Answer

A) profits/losses making firms enter or exit the industry 
B) firms expanding or shrinking their productive capacity 
C) introduction of new products and patents 
D) shifts in the demand curves of individual firms as the industry expands or contracts 
A) profits/losses making firms enter or exit the industry 
B) firms expanding or shrinking their productive capacity 
C) introduction of new products and patents 
D) shifts in the demand curves of individual firms as the industry expands or contracts

Exam 13: Monopolistic Competition

The graph depicts a monopolistically competitive firm. This monopolistically competitive firm is earning economic profits in the short run and

Which statement concerning monopolistic competition is false?

Assume that the short-run cost and demand data given in the tables below confront a monopolistic competitor selling a given product and engaged in a given amount of product promotion. What will the maximum total profits be?

Refer to the diagram for a monopolistically competitive firm. Long-run equilibrium output will be

In the long run, a representative firm in a monopolistically competitive industry will end up

Refer to the above graphs. The long-run equilibrium for a monopolistically competitive firm is represented by graph

The demand curve of a monopolistically competitive producer is

The Herfindahl index for a pure monopolist is

That one thing that monopolistic competition provides, which is not assured in the other market structures, is product variety.

Refer to the data. The four-firm concentration ratio for this industry is

Suppose that total sales in an industry in a particular year are $800 million and sales by the top four sellers are $50 million, $40 million, $30 million, and $30 million, respectively. We can conclude that

Assume that the short-run cost and demand data given in the tables below confront a monopolistic competitor selling a given product and engaged in a given amount of product promotion. What output and price levels will maximize the firm's profit in the short run?

Monopolistic competition is characterized by firms

In which industry is monopolistic competition most likely to be found?

Monopolistically competitive and purely competitive industries are similar in that

Which of the following characteristics provide a monopolistically competitive firm some monopoly power?

As new firms enter a monopolistically competitive market, the demand curves facing existing firms will tend to shift left.

What are four-firm concentration ratios? How do economists use them to define monopolistically competitive industries?

Refer to the above graph of a representative firm in monopolistic competition. If curve (2)represents ATC and line (3)represents demand, then we can conclude that the industry

Which of the following forces does not play a major part in the adjustments of a monopolistically competitive industry toward its long-run equilibrium?

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

Health Care

Immigration

International Trade

The Balance of Payments, Exchange Rates, and Trade Deficits

The Economics of Developing Countries

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