Question 1

The U.S.Justice Department

Accepted Answer

A)  scrutinizes any merger of firms in a market in which the four-firm concentration exceeds 25 percent. 
B)  uses only the Herfindahl-Hirschman Index when considering whether to challenge a merger. 
C)  is likely to challenge a merger if the Herfindahl-Hirschman Index exceeds 1800. 
D)  Answers A and B are correct. 
E)  Answers B and C are correct. 
A)  scrutinizes any merger of firms in a market in which the four-firm concentration exceeds 25 percent. 
B)  uses only the Herfindahl-Hirschman Index when considering whether to challenge a merger. 
C)  is likely to challenge a merger if the Herfindahl-Hirschman Index exceeds 1800. 
D)  Answers A and B are correct. 
E)  Answers B and C are correct.

Question 2

Excess capacity is the

Accepted Answer

A)  difference between a perfectly competitive firm's and a monopolistically competitive firm's output. 
B)  difference between a perfectly competitive firm's and a monopoly's output. 
C)  output at the maximum point of the ATC curve. 
D)  difference between the price charged by a monopoly and a monopolistically competitive firm with the same costs. 
E)  None of the above answers is correct. 
A)  difference between a perfectly competitive firm's and a monopolistically competitive firm's output. 
B)  difference between a perfectly competitive firm's and a monopoly's output. 
C)  output at the maximum point of the ATC curve. 
D)  difference between the price charged by a monopoly and a monopolistically competitive firm with the same costs. 
E)  None of the above answers is correct.

Question 3

Which of the following is an advantage to society of monopolistic competition?

Accepted Answer

A)  production at the lowest possible average cost 
B)  product variety 
C)  Only essential costs are incurred. 
D)  long-run profitability 
E)  The firms have excess capacity so they are always willing to increase their production. 
A)  production at the lowest possible average cost 
B)  product variety 
C)  Only essential costs are incurred. 
D)  long-run profitability 
E)  The firms have excess capacity so they are always willing to increase their production.

Question 4

It would be impossible for members of the fast-food industry to collude to fix prices because

Accepted Answer

A)  there are too many fast-food firms in the market. 
B)  fast food is not durable. 
C)  there are not enough fast-food firms in the market. 
D)  the price of fast-food is too low. 
E)  demanders would not buy from firms that collude. 
A)  there are too many fast-food firms in the market. 
B)  fast food is not durable. 
C)  there are not enough fast-food firms in the market. 
D)  the price of fast-food is too low. 
E)  demanders would not buy from firms that collude.

Question 5

How do advertising and other selling costs affect a firm?

Accepted Answer

A)  They shift the marginal cost curve upward. 
B)  The only effect is that the excess capacity is reduced. 
C)  The only effect is that the demand for the product increases. 
D)  They shift the average total cost curve upward. 
E)  They do not change demand and shift the average total cost curve downward. 
A)  They shift the marginal cost curve upward. 
B)  The only effect is that the excess capacity is reduced. 
C)  The only effect is that the demand for the product increases. 
D)  They shift the average total cost curve upward. 
E)  They do not change demand and shift the average total cost curve downward.

Question 6

A differentiated product has

Accepted Answer

A)  many perfect substitutes. 
B)  no close substitutes. 
C)  no substitutes of any kind. 
D)  close but not perfect substitutes. 
E)  many different complements. 
A)  many perfect substitutes. 
B)  no close substitutes. 
C)  no substitutes of any kind. 
D)  close but not perfect substitutes. 
E)  many different complements.

Question 7

A firm in monopolistic competition

Accepted Answer

A)  has no control over the price of the product it is selling. 
B)  might be selling a brand name product. 
C)  does not advertise nor market its product. 
D)  Both answers A and B are correct. 
E)  Answers A, B, and C are correct. 
A)  has no control over the price of the product it is selling. 
B)  might be selling a brand name product. 
C)  does not advertise nor market its product. 
D)  Both answers A and B are correct. 
E)  Answers A, B, and C are correct.

Question 8

The larger the four-firm concentration ratio,the ________ competition within an industry; the larger the Herfindahl-Hirschman Index,the ________ competition within an industry.

Accepted Answer

A)  more; more 
B)  more; less 
C)  less; more 
D)  less; less 
E)  The premise of the question is wrong because the four-firm concentration ratio applies only to markets with four firms in it and these markets are, by definition, not competitive. 
A)  more; more 
B)  more; less 
C)  less; more 
D)  less; less 
E)  The premise of the question is wrong because the four-firm concentration ratio applies only to markets with four firms in it and these markets are, by definition, not competitive.

Question 9

In monopolistic competition,there are ________ barriers to entry and so firms in monopolistic competition ________ make an economic profit in the long run.

Accepted Answer

A)  high; can 
B)  high; cannot 
C)  no; can 
D)  no; cannot 
E)  sometimes; can sometimes 
A)  high; can 
B)  high; cannot 
C)  no; can 
D)  no; cannot 
E)  sometimes; can sometimes

Question 10

A market in which the Herfindahl-Hirschman Index exceeds 1,800 is considered to be

Accepted Answer

A)  competitive. 
B)  not competitive. 
C)  moderately competitive. 
D)  purely competitive. 
E)  either a monopoly or monopolistic competition. 
A)  competitive. 
B)  not competitive. 
C)  moderately competitive. 
D)  purely competitive. 
E)  either a monopoly or monopolistic competition.

Question 11

-The firm in the above figure has an economic profit of ________.

Accepted Answer

A)  $0 
B)  $80 
C)  $160 
D)  more than $161 
E)  less than zero, that is, the firm has an economic loss 
A)  $0 
B)  $80 
C)  $160 
D)  more than $161 
E)  less than zero, that is, the firm has an economic loss

Question 12

What is excess capacity? What industry has excess capacity in the long run: perfect competition or monopolistic competition?

Accepted Answer

The efficient scale of output is the lev

Question 13

For a firm in monopolistic competition to undertake product development,the marginal cost of the development must be ________ the marginal benefit of the development to consumers.

Accepted Answer

A)  greater than 
B)  less than 
C)  not comparable to 
D)  equal to or less than 
E)  None of the above because a monopolistically competitive firm undertakes product development if the marginal cost of the development is less than or equal to the marginal revenue to the firm from the development. 
A)  greater than 
B)  less than 
C)  not comparable to 
D)  equal to or less than 
E)  None of the above because a monopolistically competitive firm undertakes product development if the marginal cost of the development is less than or equal to the marginal revenue to the firm from the development.

Question 14

-The figure above shows Firm X.The firm is operating in the ________ because it ________.

Accepted Answer

A)  short run; minimizes its loss when it produces 100 units 
B)  short run; maximizes profit when it produces 110 units 
C)  short run; minimizes its loss when it produces 110 units 
D)  long run; minimizes its loss when it produces 100 units 
E)  long run; maximizes profit when it charges $30 per unit 
A)  short run; minimizes its loss when it produces 100 units 
B)  short run; maximizes profit when it produces 110 units 
C)  short run; minimizes its loss when it produces 110 units 
D)  long run; minimizes its loss when it produces 100 units 
E)  long run; maximizes profit when it charges $30 per unit

Question 15

Why would a firm in a monopolistically competitive industry advertise?

Accepted Answer

Similar to virtually every other busines

Question 16

Which of the following is true about monopolistic competition but false about perfect competition?

Accepted Answer

A)  There are a large number of independently acting sellers. 
B)  There are no barriers to entry. 
C)  Firms can make an economic profit in the short run. 
D)  Firms compete on their product's price as well as its quality and marketing. 
E)  Firms cannot make an economic profit in the long run. 
A)  There are a large number of independently acting sellers. 
B)  There are no barriers to entry. 
C)  Firms can make an economic profit in the short run. 
D)  Firms compete on their product's price as well as its quality and marketing. 
E)  Firms cannot make an economic profit in the long run.

Question 17

How do product development and marketing affect a firm in monopolistic competition?

Accepted Answer

Product development and marketing have t

Question 18

A firm in monopolistic competition definitely incurs an economic loss if

Accepted Answer

A)  price equals marginal revenue. 
B)  price is less than average total cost. 
C)  marginal revenue equals marginal cost. 
D)  marginal revenue is less than average total cost. 
E)  price is greater than marginal cost. 
A)  price equals marginal revenue. 
B)  price is less than average total cost. 
C)  marginal revenue equals marginal cost. 
D)  marginal revenue is less than average total cost. 
E)  price is greater than marginal cost.

Question 19

Product differentiation involves making a product that is

Accepted Answer

A)  slightly different from the products of competing firms. 
B)  no different than the products of competing firms. 
C)  very different from the products of competing firms. 
D)  completely different from the products of competing firms. 
E)  cheaper than the products of competing firms. 
A)  slightly different from the products of competing firms. 
B)  no different than the products of competing firms. 
C)  very different from the products of competing firms. 
D)  completely different from the products of competing firms. 
E)  cheaper than the products of competing firms.

Question 20

If the four-firm concentration ratio for the market for diapers is 73 percent,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.

The U.S.Justice Department

Excess capacity is the

Which of the following is an advantage to society of monopolistic competition?

It would be impossible for members of the fast-food industry to collude to fix prices because

How do advertising and other selling costs affect a firm?

A differentiated product has

A firm in monopolistic competition

The larger the four-firm concentration ratio,the competition within an industry; the larger the Herfindahl-Hirschman Index,the competition within an industry.

In monopolistic competition,there are barriers to entry and so firms in monopolistic competition make an economic profit in the long run.

A market in which the Herfindahl-Hirschman Index exceeds 1,800 is considered to be

-The firm in the above figure has an economic profit of ________.

What is excess capacity? What industry has excess capacity in the long run: perfect competition or monopolistic competition?

For a firm in monopolistic competition to undertake product development,the marginal cost of the development must be ________ the marginal benefit of the development to consumers.

-The figure above shows Firm X.The firm is operating in the because it .

Why would a firm in a monopolistically competitive industry advertise?

Which of the following is true about monopolistic competition but false about perfect competition?

How do product development and marketing affect a firm in monopolistic competition?

A firm in monopolistic competition definitely incurs an economic loss if

Product differentiation involves making a product that is

If the four-firm concentration ratio for the market for diapers is 73 percent,then this industry is best characterized as

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

The U.S.Justice Department

Excess capacity is the

Which of the following is an advantage to society of monopolistic competition?

It would be impossible for members of the fast-food industry to collude to fix prices because

How do advertising and other selling costs affect a firm?

A differentiated product has

A firm in monopolistic competition

The larger the four-firm concentration ratio,the ________ competition within an industry; the larger the Herfindahl-Hirschman Index,the ________ competition within an industry.

In monopolistic competition,there are ________ barriers to entry and so firms in monopolistic competition ________ make an economic profit in the long run.

A market in which the Herfindahl-Hirschman Index exceeds 1,800 is considered to be

-The firm in the above figure has an economic profit of ________.

What is excess capacity? What industry has excess capacity in the long run: perfect competition or monopolistic competition?

For a firm in monopolistic competition to undertake product development,the marginal cost of the development must be ________ the marginal benefit of the development to consumers.

-The figure above shows Firm X.The firm is operating in the ________ because it ________.

Why would a firm in a monopolistically competitive industry advertise?

Which of the following is true about monopolistic competition but false about perfect competition?

How do product development and marketing affect a firm in monopolistic competition?

A firm in monopolistic competition definitely incurs an economic loss if

Product differentiation involves making a product that is

If the four-firm concentration ratio for the market for diapers is 73 percent,then this industry is best characterized as

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

The larger the four-firm concentration ratio,the competition within an industry; the larger the Herfindahl-Hirschman Index,the competition within an industry.

In monopolistic competition,there are barriers to entry and so firms in monopolistic competition make an economic profit in the long run.

-The figure above shows Firm X.The firm is operating in the because it .