Question 1

In the long run,a firm in monopolistic competition will produce

Accepted Answer

A)  where average total cost is minimized. 
B)  where price equals average total cost, but average total cost is not at its minimum. 
C)  zero output. 
D)  any possible amount of output. 
E)  where price equals marginal cost. 
A)  where average total cost is minimized. 
B)  where price equals average total cost, but average total cost is not at its minimum. 
C)  zero output. 
D)  any possible amount of output. 
E)  where price equals marginal cost.

Question 2

If the four-firm concentration ratio of an industry is

Accepted Answer

A)  near 100, the industry is considered very competitive. 
B)  less than 40, the industry is considered an oligopoly. 
C)  over 40, the industry is considered monopolistic competition. 
D)  less than 40, the industry is considered monopolistic competition. 
E)  close to 0, the industry is considered a monopoly. 
A)  near 100, the industry is considered very competitive. 
B)  less than 40, the industry is considered an oligopoly. 
C)  over 40, the industry is considered monopolistic competition. 
D)  less than 40, the industry is considered monopolistic competition. 
E)  close to 0, the industry is considered a monopoly.

Question 3

What does monopolistic competition have in common with perfect competition?

Accepted Answer

A)  a large number of firms and freedom of entry and exit 
B)  a standardized product 
C)  product differentiation 
D)  the ability to make an economic profit in the long run 
E)  barriers to exit but no barriers to entry 
A)  a large number of firms and freedom of entry and exit 
B)  a standardized product 
C)  product differentiation 
D)  the ability to make an economic profit in the long run 
E)  barriers to exit but no barriers to entry

Question 4

The four largest firms in an industry account for the following value of industry revenues: 12 percent,8 percent,5 percent and 4 percent.Calculate the four-firm concentration ratio.Would this industry be regarded as competitive or concentrated?

Accepted Answer

The four-firm concentration ra

Question 5

If a monopolistically competitive seller's marginal cost is $3.56,the firm will increase its output if

Accepted Answer

A)  its marginal revenue is less than $3.56. 
B)  its marginal revenue is equal to $3.56. 
C)  its marginal revenue is more than $3.56. 
D)  average total cost is less than $3.56. 
E)  Both answers A and D are correct. 
A)  its marginal revenue is less than $3.56. 
B)  its marginal revenue is equal to $3.56. 
C)  its marginal revenue is more than $3.56. 
D)  average total cost is less than $3.56. 
E)  Both answers A and D are correct.

Question 6

Firms decide how much to spend on product development and marketing by

Accepted Answer

A)  spending the same amount as they did in previous years. 
B)  spending the historical average of 1/4 of total production cost. 
C)  determining what it will take to eliminate excess capacity. 
D)  balancing the cost and the benefit of product development and marketing. 
E)  ensuring that the marginal cost of product development and marketing is less than or equal to the marginal cost of producing the good or service. 
A)  spending the same amount as they did in previous years. 
B)  spending the historical average of 1/4 of total production cost. 
C)  determining what it will take to eliminate excess capacity. 
D)  balancing the cost and the benefit of product development and marketing. 
E)  ensuring that the marginal cost of product development and marketing is less than or equal to the marginal cost of producing the good or service.

Question 7

Which of the following is true of monopolistic competition in long-run equilibrium?

Accepted Answer

A)  P = MR and P = MC 
B)  P > ATC and MR = MC 
C)  P = ATC and MR = MC 
D)  P = ATC and P = MC 
E)  P > ATC and P > MR 
A)  P = MR and P = MC 
B)  P > ATC and MR = MC 
C)  P = ATC and MR = MC 
D)  P = ATC and P = MC 
E)  P > ATC and P > MR

Question 8

-The above figure definitely shows

Accepted Answer

A)  a long-run equilibrium for a monopolistically competitive firm. 
B)  an industry with few firms. 
C)  a long-run equilibrium for a perfectly competitive firm. 
D)  a long-run equilibrium for a perfectly competitive market. 
E)  a short-run equilibrium for a monopoly. 
A)  a long-run equilibrium for a monopolistically competitive firm. 
B)  an industry with few firms. 
C)  a long-run equilibrium for a perfectly competitive firm. 
D)  a long-run equilibrium for a perfectly competitive market. 
E)  a short-run equilibrium for a monopoly.

Question 9

The figure above shows a firm's demand and marginal revenue curves and its cost curves.
-If all firms in the industry have similar demand,marginal revenue,and cost curves as the firm in the figure above,in the long run

Accepted Answer

A)  nothing changes. 
B)  some firms exit the industry, and the economic losses of the remaining firms decrease. 
C)  some firms exit the industry, and the economic profits of the remaining firms increase. 
D)  new firms enter the industry, and the economic losses of the original firms decrease. 
E)  new firms enter the industry, and the economic profits of the original firms increase. 
A)  nothing changes. 
B)  some firms exit the industry, and the economic losses of the remaining firms decrease. 
C)  some firms exit the industry, and the economic profits of the remaining firms increase. 
D)  new firms enter the industry, and the economic losses of the original firms decrease. 
E)  new firms enter the industry, and the economic profits of the original firms increase.

Question 10

For a firm in monopolistic competition,the efficient scale is the amount of output at which ________ is a minimum.

Accepted Answer

A)  fixed cost 
B)  average total cost 
C)  average variable cost 
D)  average fixed cost 
E)  marginal cost 
A)  fixed cost 
B)  average total cost 
C)  average variable cost 
D)  average fixed cost 
E)  marginal cost

Question 11

The freedom of entry and exit in monopolistic competition means that firms

Accepted Answer

A)  enter the market when economic losses are being incurred. 
B)  exit the market when economic profits are being made. 
C)  enter the market when firms are making zero economic profit. 
D)  can enter a market to compete for economic profits and leave when economic losses are being incurred. 
E)  find it easy to permanently make an economic profit. 
A)  enter the market when economic losses are being incurred. 
B)  exit the market when economic profits are being made. 
C)  enter the market when firms are making zero economic profit. 
D)  can enter a market to compete for economic profits and leave when economic losses are being incurred. 
E)  find it easy to permanently make an economic profit.

Question 12

$$\begin{array} { | c | c | } 
\hline \text { Firm } & \begin{array} { c } 
\text { Market Share } \
\text { (percent) }
\end{array} \
\hline \text { Firm W } & 30 \
\hline \text { Firm X } & 20 \
\hline \text { Firm Y } & 10 \
\hline \text { Firm Z } & 5 \
\hline
\end{array}$$
-A market has 4 firms in it.The market shares are in the table above.The table represents a(n)________ market because its ________.

Accepted Answer

A)  competitive; Herfindahl-Hirschman Index (HHI) equals 1425 
B)  competitive; four-firm concentration ratio equals 65 percent 
C)  uncompetitive; Herfindahl-Hirschman Index (HHI) equals 65 percent 
D)  perfectly competitive; Herfindahl-Hirschman Index (HHI) is less than 1500 
E)  uncompetitive; four-firm concentration ratio exceeds 60 percent 
A)  competitive; Herfindahl-Hirschman Index (HHI) equals 1425 
B)  competitive; four-firm concentration ratio equals 65 percent 
C)  uncompetitive; Herfindahl-Hirschman Index (HHI) equals 65 percent 
D)  perfectly competitive; Herfindahl-Hirschman Index (HHI) is less than 1500 
E)  uncompetitive; four-firm concentration ratio exceeds 60 percent

Question 13

-The above figure shows a motel engaged in monopolistic competition with other motels.the figure above shows the ________ equilibrium in which the motel is ________ .

Accepted Answer

A)  short-run; making an economic profit 
B)  short-run; making zero economic profit 
C)  long-run; making an economic profit 
D)  long-run; making zero economic profit 
E)  short-run; incurring an economic loss 
A)  short-run; making an economic profit 
B)  short-run; making zero economic profit 
C)  long-run; making an economic profit 
D)  long-run; making zero economic profit 
E)  short-run; incurring an economic loss

Question 14

If there are four firms in an industry with market shares of 50 percent,40 percent,5 percent,and 5 percent,the Herfindahl-Hirschman Index is

Accepted Answer

A)  100. 
B)  4150. 
C)  25. 
D)  3450. 
E)  undefined because there are not 50 firms in the industry. 
A)  100. 
B)  4150. 
C)  25. 
D)  3450. 
E)  undefined because there are not 50 firms in the industry.

Question 15

In the long run,advertising by all firms in a monopolistically competitive industry

Accepted Answer

A)  increases all firms' demand. 
B)  decreases all firms' demand. 
C)  lowers all firms' costs. 
D)  might increase or decrease the firms' prices. 
E)  lowers all firms' prices. 
A)  increases all firms' demand. 
B)  decreases all firms' demand. 
C)  lowers all firms' costs. 
D)  might increase or decrease the firms' prices. 
E)  lowers all firms' prices.

Question 16

In monopolistic competition,the products of different sellers are

Accepted Answer

A)  identical. 
B)  similar but slightly different. 
C)  unique without any close or perfect substitutes. 
D)  perfect substitutes. 
E)  either identical or differentiated. 
A)  identical. 
B)  similar but slightly different. 
C)  unique without any close or perfect substitutes. 
D)  perfect substitutes. 
E)  either identical or differentiated.

Question 17

When a monopolistically competitive firm's demand curve shifts leftward,what happens to its marginal revenue curve?

Accepted Answer

A)  Nothing, the marginal revenue curve is unchanged. 
B)  It disappears. 
C)  It shifts rightward. 
D)  It shifts leftward. 
E)  None of the above is correct because the effect on the marginal revenue curve depends on whether the demand was initially elastic or inelastic. 
A)  Nothing, the marginal revenue curve is unchanged. 
B)  It disappears. 
C)  It shifts rightward. 
D)  It shifts leftward. 
E)  None of the above is correct because the effect on the marginal revenue curve depends on whether the demand was initially elastic or inelastic.

Question 18

A firm's markup is

Accepted Answer

A)  the difference between average total cost with and without advertising. 
B)  the difference between demand and marginal revenue. 
C)  a signal of product quality. 
D)  the difference between price and marginal cost. 
E)  the result of producing less than the efficient scale. 
A)  the difference between average total cost with and without advertising. 
B)  the difference between demand and marginal revenue. 
C)  a signal of product quality. 
D)  the difference between price and marginal cost. 
E)  the result of producing less than the efficient scale.

Question 19

What is the Herfindahl-Hirschman Index if the four firms in an industry account have market shares of 62 percent,15 percent,15 percent,and 8 percent?

Accepted Answer

A)  100 
B)  4,358 
C)  111,600 
D)  2,822 
E)  6,200 
A)  100 
B)  4,358 
C)  111,600 
D)  2,822 
E)  6,200

Question 20

One characteristic of monopolistic competition is that it has

Accepted Answer

A)  many firms producing a slightly differentiated product. 
B)  many firms producing identical goods. 
C)  one firm producing a unique good. 
D)  a few firms producing a slightly differentiated product. 
E)  large barriers to entry. 
A)  many firms producing a slightly differentiated product. 
B)  many firms producing identical goods. 
C)  one firm producing a unique good. 
D)  a few firms producing a slightly differentiated product. 
E)  large barriers to entry.

In the long run,a firm in monopolistic competition will produce

If the four-firm concentration ratio of an industry is

What does monopolistic competition have in common with perfect competition?

The four largest firms in an industry account for the following value of industry revenues: 12 percent,8 percent,5 percent and 4 percent.Calculate the four-firm concentration ratio.Would this industry be regarded as competitive or concentrated?

If a monopolistically competitive seller's marginal cost is $3.56,the firm will increase its output if

Firms decide how much to spend on product development and marketing by

Which of the following is true of monopolistic competition in long-run equilibrium?

-The above figure definitely shows

The figure above shows a firm's demand and marginal revenue curves and its cost curves. -If all firms in the industry have similar demand,marginal revenue,and cost curves as the firm in the figure above,in the long run

For a firm in monopolistic competition,the efficient scale is the amount of output at which ________ is a minimum.

The freedom of entry and exit in monopolistic competition means that firms

Firm Market Share (percent) Firm W 30 Firm X 20 Firm Y 10 Firm Z 5 -A market has 4 firms in it.The market shares are in the table above.The table represents a(n) market because its .

-The above figure shows a motel engaged in monopolistic competition with other motels.the figure above shows the equilibrium in which the motel is .

If there are four firms in an industry with market shares of 50 percent,40 percent,5 percent,and 5 percent,the Herfindahl-Hirschman Index is

In the long run,advertising by all firms in a monopolistically competitive industry

In monopolistic competition,the products of different sellers are

When a monopolistically competitive firm's demand curve shifts leftward,what happens to its marginal revenue curve?

A firm's markup is

What is the Herfindahl-Hirschman Index if the four firms in an industry account have market shares of 62 percent,15 percent,15 percent,and 8 percent?

One characteristic of monopolistic competition is that it has

Getting Started

The U.S.and Global Economies

The Economic Problem

Demand and Supply

Elasticities of Demand and Supply

Efficiency and Fairness of Markets

Government Actions in Markets

Taxes

Global Markets in Action

Externalities

Public Goods and Common Resources

Markets with Private Information

Consumer Choice and Demand

Production and Cost

Perfect Competition

Monopoly

Oligopoly

Markets for Factors of Production

Economic Inequality

Filters

Exam 17: Monopolistic Competition

In the long run,a firm in monopolistic competition will produce

If the four-firm concentration ratio of an industry is

What does monopolistic competition have in common with perfect competition?

The four largest firms in an industry account for the following value of industry revenues: 12 percent,8 percent,5 percent and 4 percent.Calculate the four-firm concentration ratio.Would this industry be regarded as competitive or concentrated?

If a monopolistically competitive seller's marginal cost is $3.56,the firm will increase its output if

Firms decide how much to spend on product development and marketing by

Which of the following is true of monopolistic competition in long-run equilibrium?

-The above figure definitely shows

The figure above shows a firm's demand and marginal revenue curves and its cost curves. -If all firms in the industry have similar demand,marginal revenue,and cost curves as the firm in the figure above,in the long run

For a firm in monopolistic competition,the efficient scale is the amount of output at which ________ is a minimum.

The freedom of entry and exit in monopolistic competition means that firms

Firm Market Share (percent) Firm W 30 Firm X 20 Firm Y 10 Firm Z 5 -A market has 4 firms in it.The market shares are in the table above.The table represents a(n)________ market because its ________.

-The above figure shows a motel engaged in monopolistic competition with other motels.the figure above shows the ________ equilibrium in which the motel is ________ .

If there are four firms in an industry with market shares of 50 percent,40 percent,5 percent,and 5 percent,the Herfindahl-Hirschman Index is

In the long run,advertising by all firms in a monopolistically competitive industry

In monopolistic competition,the products of different sellers are

When a monopolistically competitive firm's demand curve shifts leftward,what happens to its marginal revenue curve?

A firm's markup is

What is the Herfindahl-Hirschman Index if the four firms in an industry account have market shares of 62 percent,15 percent,15 percent,and 8 percent?

One characteristic of monopolistic competition is that it has

Getting Started

The U.S.and Global Economies

The Economic Problem

Demand and Supply

Elasticities of Demand and Supply

Efficiency and Fairness of Markets

Government Actions in Markets

Taxes

Global Markets in Action

Externalities

Public Goods and Common Resources

Markets with Private Information

Consumer Choice and Demand

Production and Cost

Perfect Competition

Monopoly

Oligopoly

Markets for Factors of Production

Economic Inequality

Filters

Firm Market Share (percent) Firm W 30 Firm X 20 Firm Y 10 Firm Z 5 -A market has 4 firms in it.The market shares are in the table above.The table represents a(n) market because its .

-The above figure shows a motel engaged in monopolistic competition with other motels.the figure above shows the equilibrium in which the motel is .