Question 1

When a firm maximizes its profit,which of the following is correct for firms in monopolistic competition and perfect competition?

Accepted Answer

A)  P = MC for both types of firms. 
B)  P = MR = MC for firms in perfect competition, and P > MR = MC for firms in monopolistic competition. 
C)  MR = MC for firms in perfect competition and MR > MC for firms in monopolistic competition. 
D)  P > MR = MC for firms in both perfect competition and monopolistic competition. 
E)  P = ATC always for firms in both perfect competition and monopolistic competition. 
A)  P = MC for both types of firms. 
B)  P = MR = MC for firms in perfect competition, and P > MR = MC for firms in monopolistic competition. 
C)  MR = MC for firms in perfect competition and MR > MC for firms in monopolistic competition. 
D)  P > MR = MC for firms in both perfect competition and monopolistic competition. 
E)  P = ATC always for firms in both perfect competition and monopolistic competition.

Question 2

Product differentiation means

Accepted Answer

A)  making a product that has perfect substitutes. 
B)  making a product that is entirely unique. 
C)  the inability to set your own price. 
D)  making a product that is slightly different from products of competing firms. 
E)  making your demand curve horizontal. 
A)  making a product that has perfect substitutes. 
B)  making a product that is entirely unique. 
C)  the inability to set your own price. 
D)  making a product that is slightly different from products of competing firms. 
E)  making your demand curve horizontal.

Question 3

-The above figure shows a motel engaged in monopolistic competition with other motels.The equilibrium price at this motel is ________ per room.

Accepted Answer

A)  $20 
B)  $30 
C)  $40 
D)  $50 
E)  $10 
A)  $20 
B)  $30 
C)  $40 
D)  $50 
E)  $10

Question 4

$$\begin{array}{l}
\quad\quad\quad\quad\quad\quad\quad\quad\quad\quad\quad\text { Sales }\
\begin{array} { c c } 
\text { Firm } & \text { (millions of dollars) } \
\hline \text { QT Burgers } & 75 \
\text { Kwickie Chix } & 50 \
\text { Speedy Spuds } & 50 \
\text { Hasty Pudding } & 25 \
\text { Other 200 firms } & 800
\end{array}
\end{array}$$
-The table above shows the revenue figures for the top four firms along with a total for the remaining firms in the fast-food industry.What is the four-firm concentration ratio for the industry?

Accepted Answer

A)  200 
B)  20 percent 
C)  25 percent 
D)  80 percent 
E)  100 percent 
A)  200 
B)  20 percent 
C)  25 percent 
D)  80 percent 
E)  100 percent

Question 5

The decision to innovate

Accepted Answer

A)  depends on the marketing department's needs. 
B)  depends on whether the firm wants to benefit its customers. 
C)  is based on the marginal cost and the marginal revenue of innovation. 
D)  is unnecessary in a monopolistically competitive market. 
E)  None of the above answers is correct. 
A)  depends on the marketing department's needs. 
B)  depends on whether the firm wants to benefit its customers. 
C)  is based on the marginal cost and the marginal revenue of innovation. 
D)  is unnecessary in a monopolistically competitive market. 
E)  None of the above answers is correct.

Question 6

In the example of the Nike running shoe,we see that

Accepted Answer

A)  selling costs account for over half of a shoe's retail price. 
B)  materials actually account for two-thirds of the retail price of the shoes. 
C)  taxes account for one-quarter of the retail price of the shoes. 
D)  production costs exceed selling costs by a wide margin. 
E)  raw materials costs are by far the largest component of the total costs of producing the shoes. 
A)  selling costs account for over half of a shoe's retail price. 
B)  materials actually account for two-thirds of the retail price of the shoes. 
C)  taxes account for one-quarter of the retail price of the shoes. 
D)  production costs exceed selling costs by a wide margin. 
E)  raw materials costs are by far the largest component of the total costs of producing the shoes.

Question 7

The four-firm concentration ratio is the percentage of ________ accounted for by the four largest firms in an industry.

Accepted Answer

A)  profit 
B)  supply 
C)  total revenue 
D)  total cost 
E)  marginal cost 
A)  profit 
B)  supply 
C)  total revenue 
D)  total cost 
E)  marginal cost

Question 8

Because of the number of firms in monopolistic competition,

Accepted Answer

A)  each firm has a large market share. 
B)  it is possible for the firms to collude. 
C)  no one firm can dominate the market. 
D)  one firm has the ability to dictate market conditions. 
E)  each firm must carefully monitor what its competitors do. 
A)  each firm has a large market share. 
B)  it is possible for the firms to collude. 
C)  no one firm can dominate the market. 
D)  one firm has the ability to dictate market conditions. 
E)  each firm must carefully monitor what its competitors do.

Question 9

Monopolistic competition is efficient when compared to

Accepted Answer

A)  perfect competition. 
B)  complete product uniformity. 
C)  the short run. 
D)  the long run. 
E)  None of the above answers is correct. 
A)  perfect competition. 
B)  complete product uniformity. 
C)  the short run. 
D)  the long run. 
E)  None of the above answers is correct.

Question 10

Advertising costs and other selling costs are

Accepted Answer

A)  efficient. 
B)  fixed costs. 
C)  variable costs. 
D)  marginal costs. 
E)  considered as part of demand because they affect the demand for the good. 
A)  efficient. 
B)  fixed costs. 
C)  variable costs. 
D)  marginal costs. 
E)  considered as part of demand because they affect the demand for the good.

Question 11

If you have found the percentage of the value of total revenue accounted for by the four largest firms in an industry,you have found the

Accepted Answer

A)  elasticity of demand value. 
B)  elasticity of supply value. 
C)  Herfindahl-Hirschman Index. 
D)  four-firm concentration ratio. 
E)  monopolistic concentration index. 
A)  elasticity of demand value. 
B)  elasticity of supply value. 
C)  Herfindahl-Hirschman Index. 
D)  four-firm concentration ratio. 
E)  monopolistic concentration index.

Question 12

-Kevin owns a personal training gymnasium in Orlando.The above figure shows the demand and cost curves for his firm,which competes in a monopolistically competitive market.Kevin will train how many clients per day?

Accepted Answer

A)  4 
B)  6 
C)  10 
D)  between 2 and 4 
E)  None of the above answers is correct. 
A)  4 
B)  6 
C)  10 
D)  between 2 and 4 
E)  None of the above answers is correct.

Question 13

A firm in monopolistic competition that introduces a new and differentiated product will temporarily have a ________ demand for its product and is able to charge ________.

Accepted Answer

A)  less elastic; a lower price than before 
B)  less elastic; a higher price than before 
C)  more elastic; a lower price than before 
D)  more elastic; a higher price than before 
E)  less elastic; the same price as before 
A)  less elastic; a lower price than before 
B)  less elastic; a higher price than before 
C)  more elastic; a lower price than before 
D)  more elastic; a higher price than before 
E)  less elastic; the same price as before

Question 14

One reason a company advertises is to

Accepted Answer

A)  signal consumers that its product is high quality. 
B)  lower its total cost. 
C)  produce more efficiently. 
D)  lower its variable costs. 
E)  lower its fixed costs. 
A)  signal consumers that its product is high quality. 
B)  lower its total cost. 
C)  produce more efficiently. 
D)  lower its variable costs. 
E)  lower its fixed costs.

Question 15

Why are firms in monopolistic competition unable to make an economic profit in the long run?

Accepted Answer

While firms in monopolistic competition

Question 16

If the four-firm concentration ratio for the market for pizza is 28 percent,then this industry is best characterized as

Accepted Answer

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

Question 17

In monopolistic competition,there is inefficiency because price is greater than marginal cost.What brings about this inefficiency?

Accepted Answer

A)  high concentration, as indicated by the large concentration ratio 
B)  product differentiation 
C)  freedom of entry and exit 
D)  marginal cost rises as more output is produced 
E)  the fact there are many firms in the market 
A)  high concentration, as indicated by the large concentration ratio 
B)  product differentiation 
C)  freedom of entry and exit 
D)  marginal cost rises as more output is produced 
E)  the fact there are many firms in the market

Question 18

Firms in monopolistic competition determine the profit-maximizing level of output by producing

Accepted Answer

A)  the same output level as rivals do. 
B)  where average total cost is minimized. 
C)  at the point of minimum average fixed cost. 
D)  where marginal revenue equals marginal cost. 
E)  where price equals average total cost. 
A)  the same output level as rivals do. 
B)  where average total cost is minimized. 
C)  at the point of minimum average fixed cost. 
D)  where marginal revenue equals marginal cost. 
E)  where price equals average total cost.

Question 19

Nike is a firm in monopolistic competition.If Nike is making an economic profit from new cross-training shoe,over time the demand for these shoes

Accepted Answer

A)  increases as new firms enter the market. 
B)  decreases as new firms enter the market. 
C)  does not change as new firms enter the market. 
D)  decreases as firms exit the market. 
E)  increases as firms exit the market. 
A)  increases as new firms enter the market. 
B)  decreases as new firms enter the market. 
C)  does not change as new firms enter the market. 
D)  decreases as firms exit the market. 
E)  increases as firms exit the market.

Question 20

A market is considered competitive if the Herfindahl-Hirschman Index (HHI)is ________ and its four-firm concentration ratio is ________.

Accepted Answer

A)  high; high 
B)  high; low 
C)  low; high 
D)  low; low 
E)  between 30 percent and 70 percent; greater than 5,000 
A)  high; high 
B)  high; low 
C)  low; high 
D)  low; low 
E)  between 30 percent and 70 percent; greater than 5,000

When a firm maximizes its profit,which of the following is correct for firms in monopolistic competition and perfect competition?

Product differentiation means

-The above figure shows a motel engaged in monopolistic competition with other motels.The equilibrium price at this motel is ________ per room.

The decision to innovate

In the example of the Nike running shoe,we see that

The four-firm concentration ratio is the percentage of ________ accounted for by the four largest firms in an industry.

Because of the number of firms in monopolistic competition,

Monopolistic competition is efficient when compared to

Advertising costs and other selling costs are

If you have found the percentage of the value of total revenue accounted for by the four largest firms in an industry,you have found the

-Kevin owns a personal training gymnasium in Orlando.The above figure shows the demand and cost curves for his firm,which competes in a monopolistically competitive market.Kevin will train how many clients per day?

A firm in monopolistic competition that introduces a new and differentiated product will temporarily have a demand for its product and is able to charge .

One reason a company advertises is to

Why are firms in monopolistic competition unable to make an economic profit in the long run?

If the four-firm concentration ratio for the market for pizza is 28 percent,then this industry is best characterized as

In monopolistic competition,there is inefficiency because price is greater than marginal cost.What brings about this inefficiency?

Firms in monopolistic competition determine the profit-maximizing level of output by producing

Nike is a firm in monopolistic competition.If Nike is making an economic profit from new cross-training shoe,over time the demand for these shoes

A market is considered competitive if the Herfindahl-Hirschman Index (HHI)is and its four-firm concentration ratio is .

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

When a firm maximizes its profit,which of the following is correct for firms in monopolistic competition and perfect competition?

Product differentiation means

-The above figure shows a motel engaged in monopolistic competition with other motels.The equilibrium price at this motel is ________ per room.

The decision to innovate

In the example of the Nike running shoe,we see that

The four-firm concentration ratio is the percentage of ________ accounted for by the four largest firms in an industry.

Because of the number of firms in monopolistic competition,

Monopolistic competition is efficient when compared to

Advertising costs and other selling costs are

If you have found the percentage of the value of total revenue accounted for by the four largest firms in an industry,you have found the

-Kevin owns a personal training gymnasium in Orlando.The above figure shows the demand and cost curves for his firm,which competes in a monopolistically competitive market.Kevin will train how many clients per day?

A firm in monopolistic competition that introduces a new and differentiated product will temporarily have a ________ demand for its product and is able to charge ________.

One reason a company advertises is to

Why are firms in monopolistic competition unable to make an economic profit in the long run?

If the four-firm concentration ratio for the market for pizza is 28 percent,then this industry is best characterized as

In monopolistic competition,there is inefficiency because price is greater than marginal cost.What brings about this inefficiency?

Firms in monopolistic competition determine the profit-maximizing level of output by producing

Nike is a firm in monopolistic competition.If Nike is making an economic profit from new cross-training shoe,over time the demand for these shoes

A market is considered competitive if the Herfindahl-Hirschman Index (HHI)is ________ and its four-firm concentration ratio is ________.

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

A firm in monopolistic competition that introduces a new and differentiated product will temporarily have a demand for its product and is able to charge .

A market is considered competitive if the Herfindahl-Hirschman Index (HHI)is and its four-firm concentration ratio is .