Question 1

For a monopolistically competitive firm,the demand curve

Accepted Answer

A)  is a horizontal line. 
B)  has a positive slope. 
C)  is vertical. 
D)  has a negative slope. 
E)  is the same as the marginal revenue curve. 
A)  is a horizontal line. 
B)  has a positive slope. 
C)  is vertical. 
D)  has a negative slope. 
E)  is the same as the marginal revenue curve.

Question 2

Firms in which of the following industries can make an economic profit in the long run?

Accepted Answer

A)  both monopolistic competition and monopoly 
B)  perfect competition 
C)  monopoly 
D)  monopolistic competition 
E)  monopolistic competition and perfect competition 
A)  both monopolistic competition and monopoly 
B)  perfect competition 
C)  monopoly 
D)  monopolistic competition 
E)  monopolistic competition and perfect competition

Question 3

One of the major benefits to society of monopolistic competition is

Accepted Answer

A)  high prices. 
B)  restricted output. 
C)  product differentiation. 
D)  the excess capacity. 
E)  the markup. 
A)  high prices. 
B)  restricted output. 
C)  product differentiation. 
D)  the excess capacity. 
E)  the markup.

Question 4

The efficiency of monopolistic competition

Accepted Answer

A)  is as clear-cut as the efficiency of perfect competition. 
B)  depends on whether the gain from extra product variety offsets the selling costs and the extra cost that arises from excess capacity. 
C)  comes from its excess capacity. 
D)  is eliminated in the long run. 
E)  is equal to that of monopoly. 
A)  is as clear-cut as the efficiency of perfect competition. 
B)  depends on whether the gain from extra product variety offsets the selling costs and the extra cost that arises from excess capacity. 
C)  comes from its excess capacity. 
D)  is eliminated in the long run. 
E)  is equal to that of monopoly.

Question 5

In the long run,firms in monopolistic competition produce at a level that is ________ the efficient scale of output.

Accepted Answer

A)  less than 
B)  equal to 
C)  more than 
D)  not comparable to 
E)  All of the above are possible depending on market conditions. 
A)  less than 
B)  equal to 
C)  more than 
D)  not comparable to 
E)  All of the above are possible depending on market conditions.

Question 6

Which of the following is correct?

Accepted Answer

A)  A firm in monopolistic competition does not have excess capacity in the long run. 
B)  A firm in perfect competition operates at maximum average total cost in the long run. 
C)  In the long run, a firm in monopolistic competition maximizes its profit at a point where price is equal to average total cost but the average total cost is not minimized. 
D)  In the long run, a firm in monopolistic competition makes zero economic profit and its price is equal to the minimum average total cost. 
E)  In the long run, a firm in monopolistic competition can make an economic profit because of product differentiation. 
A)  A firm in monopolistic competition does not have excess capacity in the long run. 
B)  A firm in perfect competition operates at maximum average total cost in the long run. 
C)  In the long run, a firm in monopolistic competition maximizes its profit at a point where price is equal to average total cost but the average total cost is not minimized. 
D)  In the long run, a firm in monopolistic competition makes zero economic profit and its price is equal to the minimum average total cost. 
E)  In the long run, a firm in monopolistic competition can make an economic profit because of product differentiation.

Question 7

-The firm in the above figure has excess capacity of ________ meals per day.

Accepted Answer

A)  0 
B)  between 1 and 10 
C)  between 11 and 20 
D)  more than 21 and 30 
E)  more than 31 
A)  0 
B)  between 1 and 10 
C)  between 11 and 20 
D)  more than 21 and 30 
E)  more than 31

Question 8

If the four-firm concentration ratio equals 0.1 percent for the Mexican tomato industry,then this industry is best characterized as

Accepted Answer

A)  a monopoly. 
B)  monopolistic competition. 
C)  an oligopoly. 
D)  perfect competition. 
E)  either a monopoly or monopolistic competition. 
A)  a monopoly. 
B)  monopolistic competition. 
C)  an oligopoly. 
D)  perfect competition. 
E)  either a monopoly or monopolistic competition.

Question 9

A monopolistically competitive firm is inefficient because the firm

Accepted Answer

A)  makes positive economic profit in the long run. 
B)  is producing at an output where marginal cost equals price. 
C)  is not maximizing its profits. 
D)  produces a product identical to that of its competitors. 
E)  produces at an output level where average total cost is not at its minimum. 
A)  makes positive economic profit in the long run. 
B)  is producing at an output where marginal cost equals price. 
C)  is not maximizing its profits. 
D)  produces a product identical to that of its competitors. 
E)  produces at an output level where average total cost is not at its minimum.

Question 10

What is the Herfindahl-Hirschman Index and what does it measure?

Accepted Answer

The Herfindahl-Hirschman Index,or HHI,is

Question 11

$$\begin{array} { c c } 
\text { Firm } & \begin{array} { c } 
\text { Market share } \
\text { (percent) }
\end{array} \
\hline \text { A } & 32 \
\text { B } & 17 \
\text { C } & 15 \
\text { D } & 10 \
\text { E } & 7 \
\text { F } & 7 \
\text { G } & 5 \
\text { H } & 4 \
\text { I } & 2 \
\text { J } & 1 \
\hline
\end{array}$$
-Suppose there are ten firms that occupy the Odell,Oregon cherry pie market.The market share of each firm is listed in the above table.
a.What is the Herfindahl-Hirschman Index for this market?
b.If Firm H and Firm A merge,what is the new Herfindahl-Hirschman Index for this market?
c.A severe winter causes every firm except A,B,and E to close.With only these three firms operating,Firm A's market share is 71 percent,Firm B's market share is 23 percent,and Firm C's market share is 6 percent.What is the Herfindahl-Hirschman Index for this market now?

Accepted Answer

a.The Herfindahl-Hirschman Ind

Question 12

If firms in monopolistic competition are making economic profits,eventually

Accepted Answer

A)  they shut down. 
B)  they exit the industry. 
C)  the market turns into a monopoly. 
D)  new firms enter the industry. 
E)  the firms in the market increase their production so that their economic profit disappears. 
A)  they shut down. 
B)  they exit the industry. 
C)  the market turns into a monopoly. 
D)  new firms enter the industry. 
E)  the firms in the market increase their production so that their economic profit disappears.

Question 13

The figure above illustrates a firm's demand and marginal revenue curves and its cost curves.
-If the firm in the figure above attempted to minimize its average total cost by producing 100 pairs of Tommy jeans per day at an average total cost of $20 per pair and it sold those jeans for $80 per pair,the firm would ________.

Accepted Answer

A)  make zero economic profit 
B)  make a larger economic profit than a firm that produced 125 jeans because the ATC of producing 125 jeans is higher than the ATC of producing 100 jeans 
C)  incur an economic loss 
D)  make a smaller economic profit than a firm that produced 125 jeans 
E)  achieve an efficient use of resources 
A)  make zero economic profit 
B)  make a larger economic profit than a firm that produced 125 jeans because the ATC of producing 125 jeans is higher than the ATC of producing 100 jeans 
C)  incur an economic loss 
D)  make a smaller economic profit than a firm that produced 125 jeans 
E)  achieve an efficient use of resources

Question 14

$$\begin{array} { c c } 
\text { Firm } & \begin{array} { c } 
\text { Total revenue } \
\text { (millions of dollars) }
\end{array} \
\hline \text { A } & 12 \
\text { B } & 10 \
\text { C } & 5 \
\text { D } & 3 \
\hline
\end{array}$$
-An industry's total revenue is $100 million.The above table shows the total revenue of the four largest firms in an industry.
a.Calculate this industry's four-firm concentration ratio.
b.Is this industry competitive?
c.What market type does it most likely represent?

Accepted Answer

a.The four-firm concentration

Question 15

Which of the following four-firm concentration ratios would be the best indicator of an oligopoly?

Accepted Answer

A)  0.25 percent 
B)  31 percent 
C)  78 percent 
D)  100 percent 
E)  11 percent 
A)  0.25 percent 
B)  31 percent 
C)  78 percent 
D)  100 percent 
E)  11 percent

Question 16

In the long run,a firm in monopolistic competition ________ a markup of price over marginal cost,and a firm in perfect competition ________ a markup of price over marginal cost.

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 17

-The above figure represents a restaurant operating in monopolistic competition.
a.What is the profit-maximizing level of output?
b.What price will the firm charge?
c.What is the firm's profit (or loss)?
d.Is this a long-run equilibrium? Why or why not?
e.Is this firm producing its efficient scale of output?

Accepted Answer

a.The quantity is 20 meals a day.
b.The

Question 18

Why are selling costs high in monopolistic competition?

Accepted Answer

In monopolistic competition,there are a

Question 19

The United Company competes with many other firms each producing slightly different products.Firms freely enter and exit this industry.The type of industry United Company operates in is

Accepted Answer

A)  a monopoly. 
B)  monopolistic competition. 
C)  oligopoly. 
D)  perfect competition. 
E)  oligopolistic monopoly. 
A)  a monopoly. 
B)  monopolistic competition. 
C)  oligopoly. 
D)  perfect competition. 
E)  oligopolistic monopoly.

Question 20

In long-run equilibrium,a firm in monopolistic competition makes

Accepted Answer

A)  an economic profit but the economic profit is less than it would be if the firm was a monopoly. 
B)  an economic profit that is higher than what it would be if the firm was a monopoly. 
C)  zero economic profit. 
D)  an economic profit that is the same amount as it would be if the firm was a monopoly. 
E)  an economic profit, an economic loss, or zero economic profit. 
A)  an economic profit but the economic profit is less than it would be if the firm was a monopoly. 
B)  an economic profit that is higher than what it would be if the firm was a monopoly. 
C)  zero economic profit. 
D)  an economic profit that is the same amount as it would be if the firm was a monopoly. 
E)  an economic profit, an economic loss, or zero economic profit.

For a monopolistically competitive firm,the demand curve

Firms in which of the following industries can make an economic profit in the long run?

One of the major benefits to society of monopolistic competition is

The efficiency of monopolistic competition

In the long run,firms in monopolistic competition produce at a level that is ________ the efficient scale of output.

Which of the following is correct?

-The firm in the above figure has excess capacity of ________ meals per day.

If the four-firm concentration ratio equals 0.1 percent for the Mexican tomato industry,then this industry is best characterized as

A monopolistically competitive firm is inefficient because the firm

What is the Herfindahl-Hirschman Index and what does it measure?

If firms in monopolistic competition are making economic profits,eventually

Which of the following four-firm concentration ratios would be the best indicator of an oligopoly?

In the long run,a firm in monopolistic competition a markup of price over marginal cost,and a firm in perfect competition a markup of price over marginal cost.

Why are selling costs high in monopolistic competition?

The United Company competes with many other firms each producing slightly different products.Firms freely enter and exit this industry.The type of industry United Company operates in is

In long-run equilibrium,a firm in monopolistic competition makes

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

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Public Goods and Common Resources

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Consumer Choice and Demand

Production and Cost

Perfect Competition

Monopoly

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Filters

Exam 17: Monopolistic Competition

For a monopolistically competitive firm,the demand curve

Firms in which of the following industries can make an economic profit in the long run?

One of the major benefits to society of monopolistic competition is

The efficiency of monopolistic competition

In the long run,firms in monopolistic competition produce at a level that is ________ the efficient scale of output.

Which of the following is correct?

-The firm in the above figure has excess capacity of ________ meals per day.

If the four-firm concentration ratio equals 0.1 percent for the Mexican tomato industry,then this industry is best characterized as

A monopolistically competitive firm is inefficient because the firm

What is the Herfindahl-Hirschman Index and what does it measure?

If firms in monopolistic competition are making economic profits,eventually

Which of the following four-firm concentration ratios would be the best indicator of an oligopoly?

In the long run,a firm in monopolistic competition ________ a markup of price over marginal cost,and a firm in perfect competition ________ a markup of price over marginal cost.

Why are selling costs high in monopolistic competition?

The United Company competes with many other firms each producing slightly different products.Firms freely enter and exit this industry.The type of industry United Company operates in is

In long-run equilibrium,a firm in monopolistic competition makes

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

In the long run,a firm in monopolistic competition a markup of price over marginal cost,and a firm in perfect competition a markup of price over marginal cost.