Question 1

If a firm has excess capacity,it

Accepted Answer

A)  produces less than its efficient scale. 
B)  should advertise to maximize profits. 
C)  should decrease its markup to increase its profit. 
D)  is a perfectly competitive firm. 
E)  must face a horizontal demand curve. 
A)  produces less than its efficient scale. 
B)  should advertise to maximize profits. 
C)  should decrease its markup to increase its profit. 
D)  is a perfectly competitive firm. 
E)  must face a horizontal demand curve.

Question 2

A firm in monopolistic competition maximizes profit by equating

Accepted Answer

A)  price and marginal revenue. 
B)  price and marginal cost. 
C)  demand and marginal cost. 
D)  marginal revenue and marginal cost. 
E)  price and average total cost. 
A)  price and marginal revenue. 
B)  price and marginal cost. 
C)  demand and marginal cost. 
D)  marginal revenue and marginal cost. 
E)  price and average total cost.

Question 3

Which of the following statements about product development in monopolistic competition is correct?
i.Firms in monopolistic competition undertake too much product development for efficiency.
ii.Firms in monopolistic competition undertake too little product development for efficiency.
iii.Product development might allow the firm to make a temporary economic profit.

Accepted Answer

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

Question 4

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 5

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 6

How does a firm in monopolistic competition determine its price and quantity? What type of profit can it make in the short run and the long run?

Accepted Answer

The firm produces where its marginal cos

Question 7

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 8

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 9

The marginal revenue curve facing a monopolistically competitive firm

Accepted Answer

A)  lies on its demand curve. 
B)  lies above its demand curve. 
C)  lies below its demand curve. 
D)  is equal to its price curve. 
E)  is parallel to its demand curve. 
A)  lies on its demand curve. 
B)  lies above its demand curve. 
C)  lies below its demand curve. 
D)  is equal to its price curve. 
E)  is parallel to its demand curve.

Question 10

Which of the following four-firm concentration ratios would be the best indicator of a monopoly?

Accepted Answer

A)  0.25 percent 
B)  31 percent 
C)  78 percent 
D)  100 percent 
E)  89 percent 
A)  0.25 percent 
B)  31 percent 
C)  78 percent 
D)  100 percent 
E)  89 percent

Question 11

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 12

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 13

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 14

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 15

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 16

What is the four-firm concentration ratio if the four largest firms in an industry account for 5 percent,6 percent,7 percent,and 8 percent of total revenue?

Accepted Answer

A)  26 percent 
B)  174 percent 
C)  1,680 
D)  There is enough information given to answer the question, but none of the answers above are correct. 
E)  There is not enough information given to answer the question. 
A)  26 percent 
B)  174 percent 
C)  1,680 
D)  There is enough information given to answer the question, but none of the answers above are correct. 
E)  There is not enough information given to answer the question.

Question 17

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

Accepted Answer

While firms in monopolistic competition

Question 18

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

Question 19

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 20

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.

If a firm has excess capacity,it

A firm in monopolistic competition maximizes profit by equating

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

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

How does a firm in monopolistic competition determine its price and quantity? What type of profit can it make in the short run and the long run?

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.

One of the major benefits to society of monopolistic competition is

The marginal revenue curve facing a monopolistically competitive firm

Which of the following four-firm concentration ratios would be the best indicator of a monopoly?

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

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

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

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.

What is the four-firm concentration ratio if the four largest firms in an industry account for 5 percent,6 percent,7 percent,and 8 percent of total revenue?

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

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

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

Getting Started

The Usand 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

If a firm has excess capacity,it

A firm in monopolistic competition maximizes profit by equating

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

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

How does a firm in monopolistic competition determine its price and quantity? What type of profit can it make in the short run and the long run?

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.

One of the major benefits to society of monopolistic competition is

The marginal revenue curve facing a monopolistically competitive firm

Which of the following four-firm concentration ratios would be the best indicator of a monopoly?

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

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

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

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.

What is the four-firm concentration ratio if the four largest firms in an industry account for 5 percent,6 percent,7 percent,and 8 percent of total revenue?

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

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

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

Getting Started

The Usand 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 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.

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