Question 1

Figure 11.6
  
-Refer to Figure 11.6.The firm represented in the diagram

Accepted Answer

A) makes zero economic profit. 
B) makes zero accounting profit. 
C) should exit the industry. 
D) should expand its output to take advantage of economies of scale. 
A) makes zero economic profit. 
B) makes zero accounting profit. 
C) should exit the industry. 
D) should expand its output to take advantage of economies of scale.

Question 2

A monopolistically competitive industry that earns economic profits in the short run will

Accepted Answer

A) continue to earn economic profits in the long run. 
B) experience the entry of new rival firms into the industry in the long run. 
C) experience the exit of existing firms out of the industry in the long run. 
D) experience a rise in demand in the long run. 
A) continue to earn economic profits in the long run. 
B) experience the entry of new rival firms into the industry in the long run. 
C) experience the exit of existing firms out of the industry in the long run. 
D) experience a rise in demand in the long run.

Question 3

Does the fact that monopolistically competitive firms do not achieve productive efficiency or allocative efficiency mean that there is a significant loss in consumer welfare?

Accepted Answer

No.Although monopolistically competitive

Question 4

In the short run, a profit-maximizing firm's decision to produce should be guided by whether

Accepted Answer

A) it makes a profit. 
B) its marginal profit is maximized. 
C) its total revenue exceeds its fixed cost. 
D) its total revenue covers its variable cost. 
A) it makes a profit. 
B) its marginal profit is maximized. 
C) its total revenue exceeds its fixed cost. 
D) its total revenue covers its variable cost.

Question 5

Under perfect competition, we have one firm selling a perfectly unique product for the entire market, whereas under monopolistic competition we have many firms selling differentiated products to the entire market.

Accepted Answer

A) True 
 B)False

Question 6

Firms such as Caribou Coffee and Diedrich Coffee operate hundreds of coffeehouses nationwide while firms such as Dunn Brothers Coffee operate only in four states.How would you characterize these stores?

Accepted Answer

A) Caribou Coffee and Diedrich Coffee are oligopolists while Dunn Brothers is a monopolistic competitor. 
B) Caribou Coffee and Diedrich Coffee are duopolists while Dunn Brothers is a monopolistic competitor. 
C) Caribou Coffee and Diedrich Coffee are duopolists while Dunn Brothers is an oligopolist. 
D) They are all monopolistic competitors. 
A) Caribou Coffee and Diedrich Coffee are oligopolists while Dunn Brothers is a monopolistic competitor. 
B) Caribou Coffee and Diedrich Coffee are duopolists while Dunn Brothers is a monopolistic competitor. 
C) Caribou Coffee and Diedrich Coffee are duopolists while Dunn Brothers is an oligopolist. 
D) They are all monopolistic competitors.

Question 7

Table 11.1
 $\begin{array}{|c|c|c|}
\hline \text { Quantity } & \begin{array}{c}
\text { Price } \
\text { (dollars) }
\end{array} & \begin{array}{c}
\text { Total Revenue } \
\text { (dollars) }
\end{array} \
\hline 1 & \$ 7.50 & \$ 7.50 \
\hline 2 & 7.00 & 14.00 \
\hline 3 & 6.50 & 19.50 \
\hline 4 & 6.00 & 24.00 \
\hline 5 & 5.50 & 27.50 \
\hline 6 & 5.00 & 30.00 \
\hline
\end{array}$
-Refer to Table 11.1.What is the marginal revenue of the 3rd unit?

Accepted Answer

A) $6.50 
B) $5.50 
C) $1.83 
D) $0.50 
A) $6.50 
B) $5.50 
C) $1.83 
D) $0.50

Question 8

The financial situation at Starbucks in the late 2000s illustrates the fact that maintaining long-run profits in a monopolistically competitive market is

Accepted Answer

A) somewhat difficult. 
B) very difficult. 
C) fairly easy. 
D) almost always guaranteed. 
A) somewhat difficult. 
B) very difficult. 
C) fairly easy. 
D) almost always guaranteed.

Question 9

If a typical monopolistically competitive firm is making short-run losses, then

Accepted Answer

A) other more competitive firms will enter the market. 
B) as some firms leave, the remaining firms will experience an increase in the demand for their products. 
C) as some firms leave, the demand for the products of the remaining firms will become more elastic. 
D) the industry will eventually cease to exist. 
A) other more competitive firms will enter the market. 
B) as some firms leave, the remaining firms will experience an increase in the demand for their products. 
C) as some firms leave, the demand for the products of the remaining firms will become more elastic. 
D) the industry will eventually cease to exist.

Question 10

Figure 11.6
  
-Refer to Figure 11.6.What is the amount of excess capacity?

Accepted Answer

A) Q₄ - Q₃ units 
B) Q₄ - Q₂ units 
C) Q₃ - Q₂ units 
D) Q₃ - Q₁ units 
A) Q₄ - Q₃ units 
B) Q₄ - Q₂ units 
C) Q₃ - Q₂ units 
D) Q₃ - Q₁ units

Question 11

Figure 11.10
  
-Refer to Figure 11.10.In the long run, why will the firm produce Qf units and not Qg units, which has a lower its average cost of production?

Accepted Answer

A) Although its average cost of production is lower when the firm produces Qg units, to be able to sell its output the firm will have to charge a price below average cost, resulting in a loss. 
B) At Qg, average cost exceeds marginal cost so the firm will actually make a loss. 
C) At Qg, marginal revenue is less than average revenue which will result in a loss for the firm. 
D) The firm's goal is to charge a high price and make a small profit rather than a low price and no profit. 
A) Although its average cost of production is lower when the firm produces Qg units, to be able to sell its output the firm will have to charge a price below average cost, resulting in a loss. 
B) At Qg, average cost exceeds marginal cost so the firm will actually make a loss. 
C) At Qg, marginal revenue is less than average revenue which will result in a loss for the firm. 
D) The firm's goal is to charge a high price and make a small profit rather than a low price and no profit.

Question 12

Table 11.2
 $\begin{array}{|c|c|c|c|}
\hline \begin{array}{c}
\text { Quantity } \
\text { (cases) }
\end{array} & \begin{array}{c}
\text { Price } \
\text { (dollars) }
\end{array} & \begin{array}{c}
\text { Total Revenue } \
\text { (dollars) }
\end{array} & \begin{array}{c}
\text { Total Cost } \
\text { (dollars) }
\end{array} \
\hline 1 & \$ 75 & \$ 75 & \$ 60 \
\hline 2 & 70 & 140 & 85 \
\hline 3 & 65 & 195 & 105 \
\hline 4 & 60 & 240 & 115 \
\hline 5 & 55 & 275 & 130 \
\hline 6 & 50 & 300 & 155 \
\hline 7 & 45 & 315 & 190 \
\hline 8 & 40 & 320 & 230 \
\hline 9 & 35 & 315 & 280 \
\hline
\end{array}$ 
Eco Energy is a monopolistically competitive producer of a sports beverage called Power On. Table 11.2 shows the firm's demand and cost schedules.
-Refer to Table 11.2.What is likely to happen to the product's price in the long run?

Accepted Answer

A) It will fall. 
B) It will increase. 
C) It will remain constant. 
D) This cannot be determined without information on its long-run demand curve. 
A) It will fall. 
B) It will increase. 
C) It will remain constant. 
D) This cannot be determined without information on its long-run demand curve.

Question 13

Arturo runs a Robin's Donuts franchise.He is selling 250 iced cappuccinos per week at a price of $2.75.If he lowers the price to $2.70, he will sell 251 iced cappuccinos.What is the marginal revenue of the 251st iced cappuccino? If selling the extra iced cappuccino adds $0.20 to Arturo's costs, what will be the effect on his profit from selling 251 iced cappuccinos instead of 250?

Accepted Answer

The marginal revenue of the 251st iced c

Question 14

Table 11.2
 $\begin{array}{|c|c|c|c|}
\hline \begin{array}{c}
\text { Quantity } \
\text { (cases) }
\end{array} & \begin{array}{c}
\text { Price } \
\text { (dollars) }
\end{array} & \begin{array}{c}
\text { Total Revenue } \
\text { (dollars) }
\end{array} & \begin{array}{c}
\text { Total Cost } \
\text { (dollars) }
\end{array} \
\hline 1 & \$ 75 & \$ 75 & \$ 60 \
\hline 2 & 70 & 140 & 85 \
\hline 3 & 65 & 195 & 105 \
\hline 4 & 60 & 240 & 115 \
\hline 5 & 55 & 275 & 130 \
\hline 6 & 50 & 300 & 155 \
\hline 7 & 45 & 315 & 190 \
\hline 8 & 40 & 320 & 230 \
\hline 9 & 35 & 315 & 280 \
\hline
\end{array}$ 
Eco Energy is a monopolistically competitive producer of a sports beverage called Power On. Table 11.2 shows the firm's demand and cost schedules.
-Refer to Table 11.2.What is the marginal profit from producing and selling the 5th case?

Accepted Answer

A) $275 
B) $145 
C) $35 
D) $20 
A) $275 
B) $145 
C) $35 
D) $20

Question 15

If price exceeds average variable cost but is less than average total cost, a firm

Accepted Answer

A) should further differentiate its product. 
B) should stay in business for a while longer until its fixed costs expire. 
C) is making some profit but less than maximum profit. 
D) should shut down. 
A) should further differentiate its product. 
B) should stay in business for a while longer until its fixed costs expire. 
C) is making some profit but less than maximum profit. 
D) should shut down.

Question 16

As customers switch from renting DVDs to downloading or streaming movies from the Internet, Netflix will likely find it ________ to remain profitable as they face ________ competition with streaming movies than with mail order DVD rental.

Accepted Answer

A) harder; more 
B) harder; less 
C) easier; more 
D) easier; less 
A) harder; more 
B) harder; less 
C) easier; more 
D) easier; less

Question 17

A monopolistically competitive firm will

Accepted Answer

A) charge the same price as its competitors do. 
B) always produce at the minimum efficient scale of production. 
C) have some control over its price because its product is differentiated. 
D) produce an output level that is productively and allocatively efficient. 
A) charge the same price as its competitors do. 
B) always produce at the minimum efficient scale of production. 
C) have some control over its price because its product is differentiated. 
D) produce an output level that is productively and allocatively efficient.

Question 18

Figure 11.6
  
-Refer to Figure 11.6.What is the monopolistic competitor's profit maximizing price?

Accepted Answer

A) P₁ 
B) P₂ 
C) P₃ 
D) P₄ 
A) P₁ 
B) P₂ 
C) P₃ 
D) P₄

Question 19

A monopolistically competitive firm maximizes profit where

Accepted Answer

A) price = marginal revenue. 
B) price > marginal cost. 
C) marginal revenue > average revenue. 
D) total revenue > marginal cost. 
A) price = marginal revenue. 
B) price > marginal cost. 
C) marginal revenue > average revenue. 
D) total revenue > marginal cost.

Question 20

Figure 11.10
  
-Refer to Figure 11.10.Suppose the firm is currently producing Qf units.What happens if it increases its output to Qg units?

Accepted Answer

A) Its average cost of production will fall and its profit will rise. 
B) It will be taking advantage of economies of scale and will be able to lower the price of its product. 
C) It will move from a zero profit situation to a profit situation. 
D) It will move from a zero profit situation to a loss situation. 
A) Its average cost of production will fall and its profit will rise. 
B) It will be taking advantage of economies of scale and will be able to lower the price of its product. 
C) It will move from a zero profit situation to a profit situation. 
D) It will move from a zero profit situation to a loss situation.

Figure 11.6 -Refer to Figure 11.6.The firm represented in the diagram

A monopolistically competitive industry that earns economic profits in the short run will

Does the fact that monopolistically competitive firms do not achieve productive efficiency or allocative efficiency mean that there is a significant loss in consumer welfare?

In the short run, a profit-maximizing firm's decision to produce should be guided by whether

Under perfect competition, we have one firm selling a perfectly unique product for the entire market, whereas under monopolistic competition we have many firms selling differentiated products to the entire market.

Firms such as Caribou Coffee and Diedrich Coffee operate hundreds of coffeehouses nationwide while firms such as Dunn Brothers Coffee operate only in four states.How would you characterize these stores?

Table 11.1 Quantity Price (dollars) Total Revenue (dollars) 1 \ 7.50 \ 7.50 2 7.00 14.00 3 6.50 19.50 4 6.00 24.00 5 5.50 27.50 6 5.00 30.00 -Refer to Table 11.1.What is the marginal revenue of the 3rd unit?

The financial situation at Starbucks in the late 2000s illustrates the fact that maintaining long-run profits in a monopolistically competitive market is

If a typical monopolistically competitive firm is making short-run losses, then

Figure 11.6 -Refer to Figure 11.6.What is the amount of excess capacity?

Figure 11.10 -Refer to Figure 11.10.In the long run, why will the firm produce Qf units and not Qg units, which has a lower its average cost of production?

If price exceeds average variable cost but is less than average total cost, a firm

As customers switch from renting DVDs to downloading or streaming movies from the Internet, Netflix will likely find it to remain profitable as they face competition with streaming movies than with mail order DVD rental.

A monopolistically competitive firm will

Figure 11.6 -Refer to Figure 11.6.What is the monopolistic competitor's profit maximizing price?

A monopolistically competitive firm maximizes profit where

Figure 11.10 -Refer to Figure 11.10.Suppose the firm is currently producing Qf units.What happens if it increases its output to Qg units?

Economics: Foundations and Models

Trade-Offs, Comparative Advantage, and the Market System

Where Prices Come From: the Interaction of Demand and Supply

Economic Efficiency, Government Price Setting, and Taxes

Externalities, Environmental Policy, and Public Goods

Elasticity: the Responsiveness of Demand and Supply

Comparative Advantage and the Gains From International Trade

Consumer Choice and Behavioral Economics

Technology, Production, and Costs

Firms in Perfectly Competitive Markets

Oligopoly: Firms in Less Competitive Markets

Monopoly and Antitrust Policy

The Markets for Labour and Other Factors of Production

Public Choice, Taxes, and the Distribution of Income

Pricing Strategy

Firms, the Stock Market, and Corporate Governance

Filters

Exam 11: Monopolistic Competition

Figure 11.6 -Refer to Figure 11.6.The firm represented in the diagram

A monopolistically competitive industry that earns economic profits in the short run will

Does the fact that monopolistically competitive firms do not achieve productive efficiency or allocative efficiency mean that there is a significant loss in consumer welfare?

In the short run, a profit-maximizing firm's decision to produce should be guided by whether

Under perfect competition, we have one firm selling a perfectly unique product for the entire market, whereas under monopolistic competition we have many firms selling differentiated products to the entire market.

Firms such as Caribou Coffee and Diedrich Coffee operate hundreds of coffeehouses nationwide while firms such as Dunn Brothers Coffee operate only in four states.How would you characterize these stores?

Table 11.1 Quantity Price (dollars) Total Revenue (dollars) 1 \ 7.50 \ 7.50 2 7.00 14.00 3 6.50 19.50 4 6.00 24.00 5 5.50 27.50 6 5.00 30.00 -Refer to Table 11.1.What is the marginal revenue of the 3rd unit?

The financial situation at Starbucks in the late 2000s illustrates the fact that maintaining long-run profits in a monopolistically competitive market is

If a typical monopolistically competitive firm is making short-run losses, then

Figure 11.6 -Refer to Figure 11.6.What is the amount of excess capacity?

Figure 11.10 -Refer to Figure 11.10.In the long run, why will the firm produce Qf units and not Qg units, which has a lower its average cost of production?

If price exceeds average variable cost but is less than average total cost, a firm

As customers switch from renting DVDs to downloading or streaming movies from the Internet, Netflix will likely find it ________ to remain profitable as they face ________ competition with streaming movies than with mail order DVD rental.

A monopolistically competitive firm will

Figure 11.6 -Refer to Figure 11.6.What is the monopolistic competitor's profit maximizing price?

A monopolistically competitive firm maximizes profit where

Figure 11.10 -Refer to Figure 11.10.Suppose the firm is currently producing Qf units.What happens if it increases its output to Qg units?

Economics: Foundations and Models

Trade-Offs, Comparative Advantage, and the Market System

Where Prices Come From: the Interaction of Demand and Supply

Economic Efficiency, Government Price Setting, and Taxes

Externalities, Environmental Policy, and Public Goods

Elasticity: the Responsiveness of Demand and Supply

Comparative Advantage and the Gains From International Trade

Consumer Choice and Behavioral Economics

Technology, Production, and Costs

Firms in Perfectly Competitive Markets

Oligopoly: Firms in Less Competitive Markets

Monopoly and Antitrust Policy

The Markets for Labour and Other Factors of Production

Public Choice, Taxes, and the Distribution of Income

Pricing Strategy

Firms, the Stock Market, and Corporate Governance

Filters

As customers switch from renting DVDs to downloading or streaming movies from the Internet, Netflix will likely find it to remain profitable as they face competition with streaming movies than with mail order DVD rental.