Question 1

To maintain their economic profits,firms in monopolistic competition must continually engage in

Accepted Answer

A)  product development and marketing. 
B)  lowering their product's price. 
C)  raising their product's price. 
D)  realizing short-run losses. 
E)  making the demand for their product more elastic. 
A)  product development and marketing. 
B)  lowering their product's price. 
C)  raising their product's price. 
D)  realizing short-run losses. 
E)  making the demand for their product more elastic.

Question 2

Firms attempt to create a consumer perception of product differentiation through
i.packaging.
ii.marketing.
iii.advertising.

Accepted Answer

A)  i only 
B)  ii only 
C)  ii and iii 
D)  i and iii 
E)  i, ii, and iii 
A)  i only 
B)  ii only 
C)  ii and iii 
D)  i and iii 
E)  i, ii, and iii

Question 3

$$\begin{array} { | l | c | } 
\hline { \text { Firm } } & \begin{array} { c } 
\text { Sales } \
\text { (millions of dollars) }
\end{array} \
\hline \text { Firm 1 } & 100 \
\hline \text { Firm 2 } & 90 \
\hline \text { Firm 3 } & 85 \
\hline \text { Firm 4 } & 80 \
\hline & \
\hline \text { Other 50 firms } & 645 \
\hline
\end{array}$$
-The table above shows the revenue figures for a(n)________ market because its four-firm concentration ratio is ________ percent.

Accepted Answer

A)  competitive; 35.5 
B)  uncompetitive; 55 
C)  perfectly competitive; 15.5 
D)  concentrated; 55 
E)  perfectly competitive; 35.5 
A)  competitive; 35.5 
B)  uncompetitive; 55 
C)  perfectly competitive; 15.5 
D)  concentrated; 55 
E)  perfectly competitive; 35.5

Question 4

If a monopolistically competitive seller's marginal cost is $3.56,the firm will not change 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)  its average total cost is equal to $3.56. 
E)  Both answers B 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)  its average total cost is equal to $3.56. 
E)  Both answers B and D are correct.

Question 5

A firm in monopolistic competition makes its decisions on quantity and price by

Accepted Answer

A)  taking price as given from the market and producing where MR = MC. 
B)  taking both price and quantity as given from the market. 
C)  producing where MR = MC and setting the price for this quantity from the demand curve. 
D)  taking quantity as given from the market and setting the price for this quantity from the demand curve. 
E)  producing where MR = MC and setting the price so that P = MR = MC. 
A)  taking price as given from the market and producing where MR = MC. 
B)  taking both price and quantity as given from the market. 
C)  producing where MR = MC and setting the price for this quantity from the demand curve. 
D)  taking quantity as given from the market and setting the price for this quantity from the demand curve. 
E)  producing where MR = MC and setting the price so that P = MR = MC.

Question 6

-The figure above shows Firm X.The firm is a monopolistically competitive market.The firm makes an ________ in the short run but will ________ in the long run.

Accepted Answer

A)  economic loss of $10 per unit; go out of business or make a zero economic profit 
B)  economic loss of $2 per unit; make an economic profit 
C)  economic profit $10 per unit; make zero economic profit 
D)  economic profit of $1000; definitely go out of business 
E)  economic loss of $10 per unit; definitely face more competition 
A)  economic loss of $10 per unit; go out of business or make a zero economic profit 
B)  economic loss of $2 per unit; make an economic profit 
C)  economic profit $10 per unit; make zero economic profit 
D)  economic profit of $1000; definitely go out of business 
E)  economic loss of $10 per unit; definitely face more competition

Question 7

List four characteristics of monopolistic competition.

Accepted Answer

There are a large number firms; each pro

Question 8

The figure above illustrates a firm's demand and marginal revenue curves and its cost curves.
-To maximize its profit,the firm in the figure above will produce ________ jeans and set a price of ________ per pair of jeans.

Accepted Answer

A)  150; between $50 and $25 
B)  125; $25 
C)  125; $50 
D)  125; $75 
E)  None of the above answers is correct. 
A)  150; between $50 and $25 
B)  125; $25 
C)  125; $50 
D)  125; $75 
E)  None of the above answers is correct.

Question 9

In the long run,a firm in monopolistic competition ________ excess capacity and a firm in perfect competition ________ excess capacity.

Accepted Answer

A)  has; has 
B)  has; does not have 
C)  does not have; has 
D)  does not have; does not have 
E)  might have; might have 
A)  has; has 
B)  has; does not have 
C)  does not have; has 
D)  does not have; does not have 
E)  might have; might have

Question 10

If a firm in the long run produces less than its efficient scale,it

Accepted Answer

A)  should raise its markup to increase its profit. 
B)  should lower its markup to increase its profit. 
C)  cannot be a perfectly competitive firm. 
D)  should not advertise to increase its profit. 
E)  must have its markup equal to zero. 
A)  should raise its markup to increase its profit. 
B)  should lower its markup to increase its profit. 
C)  cannot be a perfectly competitive firm. 
D)  should not advertise to increase its profit. 
E)  must have its markup equal to zero.

Question 11

Explain the role of advertising in monopolistic competition.Describe how advertising by all firms in a monopolistically competitive industry impacts a firm's ATC curve,its MC curve,its demand curve,and its MR curve.

Accepted Answer

In order to maintain (or regain)economic

Question 12

"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 mo

Question 13

What does monopolistic competition have in common with monopoly?

Accepted Answer

A)  a large number of firms 
B)  a downward-sloping demand curve 
C)  the ability to collude with respect to price 
D)  mutual interdependence 
E)  barriers to entry 
A)  a large number of firms 
B)  a downward-sloping demand curve 
C)  the ability to collude with respect to price 
D)  mutual interdependence 
E)  barriers to entry

Question 14

Crest Toothpaste offers new whitening toothpaste one year,a new gel swirl design the next year,and an improved cleaning formula the year after.Crest Toothpaste does this because it is

Accepted Answer

A)  a monopoly trying to decrease its costs. 
B)  a perfectly competitive firm trying to increase its price. 
C)  a monopolistically competitive firm trying to maintain its economic profit. 
D)  driving its competitors out of business. 
E)  a perfectly competitive firm trying to increase its costs so it can increase its price. 
A)  a monopoly trying to decrease its costs. 
B)  a perfectly competitive firm trying to increase its price. 
C)  a monopolistically competitive firm trying to maintain its economic profit. 
D)  driving its competitors out of business. 
E)  a perfectly competitive firm trying to increase its costs so it can increase its price.

Question 15

Each of the ten firms in an industry has 10 percent of the industry's total revenue.The four-firm concentration ratio is

Accepted Answer

A)  80. 
B)  100. 
C)  1,000. 
D)  40. 
E)  10. 
A)  80. 
B)  100. 
C)  1,000. 
D)  40. 
E)  10.

Question 16

The clothing industry has many firms with differentiated products and no barriers to entry.The cereal industry has a few firms with either identical or differentiated products and moderate barriers to entry.The food industry is characterized as ________,and the cereal industry is characterized as ________.

Accepted Answer

A)  perfect competition; monopolistic competition 
B)  monopolistic competition; oligopoly 
C)  oligopoly; monopolistic competition 
D)  perfect competition; perfect competition 
E)  monopolistic competition; monopoly 
A)  perfect competition; monopolistic competition 
B)  monopolistic competition; oligopoly 
C)  oligopoly; monopolistic competition 
D)  perfect competition; perfect competition 
E)  monopolistic competition; monopoly

Question 17

The figure above shows a firm's demand and marginal revenue curves and its cost curves.
-The firm illustrated above is

Accepted Answer

A)  making an economic profit of $400,000 per month. 
B)  making an economic profit of $2,000,000 per month. 
C)  making an economic profit of $1,600,000 per month. 
D)  incurring an economic loss of $400,000 per month. 
E)  incurring an economic loss of $1,600,000 per month. 
A)  making an economic profit of $400,000 per month. 
B)  making an economic profit of $2,000,000 per month. 
C)  making an economic profit of $1,600,000 per month. 
D)  incurring an economic loss of $400,000 per month. 
E)  incurring an economic loss of $1,600,000 per month.

Question 18

For a firm in monopolistic competition,selling costs

Accepted Answer

A)  increase costs and reduce profits. 
B)  always increase demand. 
C)  can change the quantity produced and lower the average total cost. 
D)  can lower total cost. 
E)  have no effect on the quantity sold. 
A)  increase costs and reduce profits. 
B)  always increase demand. 
C)  can change the quantity produced and lower the average total cost. 
D)  can lower total cost. 
E)  have no effect on the quantity sold.

Question 19

The absence of barriers to entry in monopolistic competition means that in the long run firms

Accepted Answer

A)  make an economic profit. 
B)  make zero economic profit. 
C)  incur an economic loss. 
D)  make either an economic profit or zero economic profit. 
E)  make either zero economic profit or incur an economic loss. 
A)  make an economic profit. 
B)  make zero economic profit. 
C)  incur an economic loss. 
D)  make either an economic profit or zero economic profit. 
E)  make either zero economic profit or incur an economic loss.

Question 20

In monopolistic competition in the long run,firms ________.

Accepted Answer

A)  make zero economic profit and require more capacity 
B)  incur an economic loss and require more capacity 
C)  make an economic profit and have excess capacity 
D)  make zero economic profit and have excess capacity 
E)  make an economic profit and require more capacity 
A)  make zero economic profit and require more capacity 
B)  incur an economic loss and require more capacity 
C)  make an economic profit and have excess capacity 
D)  make zero economic profit and have excess capacity 
E)  make an economic profit and require more capacity

To maintain their economic profits,firms in monopolistic competition must continually engage in

Firms attempt to create a consumer perception of product differentiation through i.packaging. ii.marketing. iii.advertising.

Firm Sales (millions of dollars) Firm 1 100 Firm 2 90 Firm 3 85 Firm 4 80 Other 50 firms 645 -The table above shows the revenue figures for a(n) market because its four-firm concentration ratio is percent.

If a monopolistically competitive seller's marginal cost is $3.56,the firm will not change its output if

A firm in monopolistic competition makes its decisions on quantity and price by

-The figure above shows Firm X.The firm is a monopolistically competitive market.The firm makes an in the short run but will in the long run.

List four characteristics of monopolistic competition.

The figure above illustrates a firm's demand and marginal revenue curves and its cost curves. -To maximize its profit,the firm in the figure above will produce jeans and set a price of per pair of jeans.

In the long run,a firm in monopolistic competition excess capacity and a firm in perfect competition excess capacity.

If a firm in the long run produces less than its efficient scale,it

Explain the role of advertising in monopolistic competition.Describe how advertising by all firms in a monopolistically competitive industry impacts a firm's ATC curve,its MC curve,its demand curve,and its MR curve.

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

What does monopolistic competition have in common with monopoly?

Crest Toothpaste offers new whitening toothpaste one year,a new gel swirl design the next year,and an improved cleaning formula the year after.Crest Toothpaste does this because it is

Each of the ten firms in an industry has 10 percent of the industry's total revenue.The four-firm concentration ratio is

The clothing industry has many firms with differentiated products and no barriers to entry.The cereal industry has a few firms with either identical or differentiated products and moderate barriers to entry.The food industry is characterized as ,and the cereal industry is characterized as .

The figure above shows a firm's demand and marginal revenue curves and its cost curves. -The firm illustrated above is

For a firm in monopolistic competition,selling costs

The absence of barriers to entry in monopolistic competition means that in the long run firms

In monopolistic competition in the long run,firms ________.

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

To maintain their economic profits,firms in monopolistic competition must continually engage in

Firms attempt to create a consumer perception of product differentiation through i.packaging. ii.marketing. iii.advertising.

Firm Sales (millions of dollars) Firm 1 100 Firm 2 90 Firm 3 85 Firm 4 80 Other 50 firms 645 -The table above shows the revenue figures for a(n)________ market because its four-firm concentration ratio is ________ percent.

If a monopolistically competitive seller's marginal cost is $3.56,the firm will not change its output if

A firm in monopolistic competition makes its decisions on quantity and price by

-The figure above shows Firm X.The firm is a monopolistically competitive market.The firm makes an ________ in the short run but will ________ in the long run.

List four characteristics of monopolistic competition.

The figure above illustrates a firm's demand and marginal revenue curves and its cost curves. -To maximize its profit,the firm in the figure above will produce ________ jeans and set a price of ________ per pair of jeans.

In the long run,a firm in monopolistic competition ________ excess capacity and a firm in perfect competition ________ excess capacity.

If a firm in the long run produces less than its efficient scale,it

Explain the role of advertising in monopolistic competition.Describe how advertising by all firms in a monopolistically competitive industry impacts a firm's ATC curve,its MC curve,its demand curve,and its MR curve.

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

What does monopolistic competition have in common with monopoly?

Crest Toothpaste offers new whitening toothpaste one year,a new gel swirl design the next year,and an improved cleaning formula the year after.Crest Toothpaste does this because it is

Each of the ten firms in an industry has 10 percent of the industry's total revenue.The four-firm concentration ratio is

The figure above shows a firm's demand and marginal revenue curves and its cost curves. -The firm illustrated above is

For a firm in monopolistic competition,selling costs

The absence of barriers to entry in monopolistic competition means that in the long run firms

In monopolistic competition in the long run,firms ________.

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 Sales (millions of dollars) Firm 1 100 Firm 2 90 Firm 3 85 Firm 4 80 Other 50 firms 645 -The table above shows the revenue figures for a(n) market because its four-firm concentration ratio is percent.

-The figure above shows Firm X.The firm is a monopolistically competitive market.The firm makes an in the short run but will in the long run.

The figure above illustrates a firm's demand and marginal revenue curves and its cost curves. -To maximize its profit,the firm in the figure above will produce jeans and set a price of per pair of jeans.

In the long run,a firm in monopolistic competition excess capacity and a firm in perfect competition excess capacity.