Question 1

What is the difference between a four-firm concentration ratio and a Herfindahl-Hirschman Index?

Accepted Answer

A four-firm concentration ratio is the p

Question 2

If the Herfindahl-Hirschman Index in the market for single-use cameras equals 10,000 ,then the single-use camera 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 3

In monopolistic competition,profit is maximized by producing so that marginal revenue

Accepted Answer

A)  equals price. 
B)  is negative. 
C)  equals marginal cost and which are less than price. 
D)  equals average total cost but not marginal cost. 
E)  equals marginal cost and equals price. 
A)  equals price. 
B)  is negative. 
C)  equals marginal cost and which are less than price. 
D)  equals average total cost but not marginal cost. 
E)  equals marginal cost and equals price.

Question 4

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 that 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 that 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 5

Because of product differentiation,firms

Accepted Answer

A)  do not have to compete because their products are unique. 
B)  cannot compete on price. 
C)  can compete on the basis of quality. 
D)  are unable to compete by using advertising. 
E)  must compete on only price. 
A)  do not have to compete because their products are unique. 
B)  cannot compete on price. 
C)  can compete on the basis of quality. 
D)  are unable to compete by using advertising. 
E)  must compete on only price.

Question 6

In which of the following ways do advertising and other selling costs affect a firm's cost curves?
i.Advertising expenditures increase total fixed costs.
ii.Selling costs increase total fixed costs.
iii.Advertising and other selling costs per unit of output decrease as output increases.

Accepted Answer

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

Question 7

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 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 are always willing to increase their production.

Question 8

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 9

In the long run,firms in monopolistic competition make zero economic profit.When firms make zero economic profit,in the long run hey exit the industry.

Accepted Answer

A)  The first sentence is correct and the second sentence is incorrect. 
B)  The first sentence is incorrect and the second sentence is correct. 
C)  Both sentences are correct. 
D)  Both sentences are incorrect. 
E)  More information about the presence or absence of barriers to entry and exit is needed to determine if the statements are true or false. 
A)  The first sentence is correct and the second sentence is incorrect. 
B)  The first sentence is incorrect and the second sentence is correct. 
C)  Both sentences are correct. 
D)  Both sentences are incorrect. 
E)  More information about the presence or absence of barriers to entry and exit is needed to determine if the statements are true or false.

Question 10

Monopolistic competition is defined as a type of market structure in which

Accepted Answer

A)  many firms produce the good. 
B)  firms produce a homogeneous good. 
C)  there are barriers to entry. 
D)  firms can make an economic profit in the long run. 
E)  firms can easily enter the market but cannot easily exit from it. 
A)  many firms produce the good. 
B)  firms produce a homogeneous good. 
C)  there are barriers to entry. 
D)  firms can make an economic profit in the long run. 
E)  firms can easily enter the market but cannot easily exit from it.

Question 11

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 12

Which of the following is NOT a characteristic of monopolistic competition?

Accepted Answer

A)  few firms compete 
B)  easy entry and exit 
C)  small market share 
D)  differentiated product 
E)  no barriers to entry or exit 
A)  few firms compete 
B)  easy entry and exit 
C)  small market share 
D)  differentiated product 
E)  no barriers to entry or exit

Question 13

In monopolistic competition,the presence of a large number of firms making a differentiated product means that

Accepted Answer

A)  each firm can set the price of its particular product. 
B)  each firm must charge the same price. 
C)  the price is established by collusive behavior. 
D)  each firm must produce the same quantity. 
E)  firms cannot compete with each other on the basis of price. 
A)  each firm can set the price of its particular product. 
B)  each firm must charge the same price. 
C)  the price is established by collusive behavior. 
D)  each firm must produce the same quantity. 
E)  firms cannot compete with each other on the basis of price.

Question 14

In the long run in monopolistic competition,firms

Accepted Answer

A)  can make an economic profit. 
B)  incur an economic loss. 
C)  make zero economic profit. 
D)  shut down if they are making zero economic profit. 
E)  make either an economic profit or zero economic profit. 
A)  can make an economic profit. 
B)  incur an economic loss. 
C)  make zero economic profit. 
D)  shut down if they are making zero economic profit. 
E)  make either an economic profit or zero economic profit.

Question 15

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 16

For a firm in monopolistic competition,define efficient scale and excess capacity.Briefly explain each.

Accepted Answer

The efficient scale is the quantity prod

Question 17

If advertising increases the numbers of firms in an industry,each firm's demand

Accepted Answer

A)  increases. 
B)  does not change. 
C)  decreases. 
D)  might increase or decrease depending on whether the new firms produce exactly the same product or a product that is slightly differentiated. 
E)  None of the above answers is correct. 
A)  increases. 
B)  does not change. 
C)  decreases. 
D)  might increase or decrease depending on whether the new firms produce exactly the same product or a product that is slightly differentiated. 
E)  None of the above answers is correct.

Question 18

Because economic profits are eliminated in the long run in monopolistic competition,to make an economic profit firms continuously

Accepted Answer

A)  shut down. 
B)  exit the industry. 
C)  develop and market new products. 
D)  declare bankruptcy. 
E)  decrease their costs by decreasing their selling costs. 
A)  shut down. 
B)  exit the industry. 
C)  develop and market new products. 
D)  declare bankruptcy. 
E)  decrease their costs by decreasing their selling costs.

Question 19

-The above figure represents Tony's Pizza Parlor,a firm in monopolistic competition.
a.What quantity will be produced?
b.What price will be charged?
c.What is Tony's total cost?
d.What is Tony's total revenue?
e.What is Tony's economic profit or loss?
f. Is this a long-run equilibrium? Why or why not?

Accepted Answer

a.40 pizzas per day
b.$12.00 per pizza
c

Question 20

How would a merger between Coca-Cola and Pepsi Cola affect the four-firm concentration ratio for the soft drink market? How would it affect the Herfindahl-Hirschman Index for the soft drink market?

Accepted Answer

Both Coca-Cola and Pepsi Cola are among

What is the difference between a four-firm concentration ratio and a Herfindahl-Hirschman Index?

If the Herfindahl-Hirschman Index in the market for single-use cameras equals 10,000 ,then the single-use camera industry is best characterized as

In monopolistic competition,profit is maximized by producing so that marginal revenue

Because of product differentiation,firms

In which of the following ways do advertising and other selling costs affect a firm's cost curves? i.Advertising expenditures increase total fixed costs. ii.Selling costs increase total fixed costs. iii.Advertising and other selling costs per unit of output decrease as output increases.

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

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

In the long run,firms in monopolistic competition make zero economic profit.When firms make zero economic profit,in the long run hey exit the industry.

Monopolistic competition is defined as a type of market structure in which

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

Which of the following is NOT a characteristic of monopolistic competition?

In monopolistic competition,the presence of a large number of firms making a differentiated product means that

In the long run in monopolistic competition,firms

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

For a firm in monopolistic competition,define efficient scale and excess capacity.Briefly explain each.

If advertising increases the numbers of firms in an industry,each firm's demand

Because economic profits are eliminated in the long run in monopolistic competition,to make an economic profit firms continuously

How would a merger between Coca-Cola and Pepsi Cola affect the four-firm concentration ratio for the soft drink market? How would it affect the Herfindahl-Hirschman Index for the soft drink market?

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

What is the difference between a four-firm concentration ratio and a Herfindahl-Hirschman Index?

If the Herfindahl-Hirschman Index in the market for single-use cameras equals 10,000 ,then the single-use camera industry is best characterized as

In monopolistic competition,profit is maximized by producing so that marginal revenue

Because of product differentiation,firms

In which of the following ways do advertising and other selling costs affect a firm's cost curves? i.Advertising expenditures increase total fixed costs. ii.Selling costs increase total fixed costs. iii.Advertising and other selling costs per unit of output decrease as output increases.

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

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

In the long run,firms in monopolistic competition make zero economic profit.When firms make zero economic profit,in the long run hey exit the industry.

Monopolistic competition is defined as a type of market structure in which

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

Which of the following is NOT a characteristic of monopolistic competition?

In monopolistic competition,the presence of a large number of firms making a differentiated product means that

In the long run in monopolistic competition,firms

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

For a firm in monopolistic competition,define efficient scale and excess capacity.Briefly explain each.

If advertising increases the numbers of firms in an industry,each firm's demand

Because economic profits are eliminated in the long run in monopolistic competition,to make an economic profit firms continuously

How would a merger between Coca-Cola and Pepsi Cola affect the four-firm concentration ratio for the soft drink market? How would it affect the Herfindahl-Hirschman Index for the soft drink market?

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