Question 1

Which of the following characteristics is common to monopolistic competition and perfect competition?

Accepted Answer

A) Firms produce identical products. 
B) Entry barriers into the industry are low. 
C) Each firm faces a downward-sloping demand curve. 
D) Firms take market prices as given. 
A) Firms produce identical products. 
B) Entry barriers into the industry are low. 
C) Each firm faces a downward-sloping demand curve. 
D) Firms take market prices as given.

Question 2

Unlike a perfectly competitive firm, a monopolistic competitor does not have a short-run shut-down point.

Accepted Answer

A) True 
 B)False

Question 3

In the long-run equilibrium, a monopolistically competitive firm earning normal profit produces the allocatively efficient output level.

Accepted Answer

A) True 
 B)False

Question 4

A successful trademark is one that becomes a generic name for a product, for example, "Kleenex" has become a generic term for tissues.

Accepted Answer

A) True 
 B)False

Question 5

If a monopolistically competitive firm breaks even, the firm is earning as much in this industry as it could in any other comparable industry.

Accepted Answer

A) True 
 B)False

Question 6

Table 13-4
   
Table 13-4 lists estimated revenues and costs (per week)for plastic vials (100 vials per box)for the Victoria Biological Supplies Company. Victoria sells plastic vials to universities and private research laboratories.
-Refer to Table 13-4.At Victoria's profit-maximizing output,

Accepted Answer

A) profit equals $2. 
B) total revenue equals $24 and total cost equals $20. 
C) total revenue equals $25 and total cost equals $22. 
D) total revenue equals $21 and total cost equals $17. 
A) profit equals $2. 
B) total revenue equals $24 and total cost equals $20. 
C) total revenue equals $25 and total cost equals $22. 
D) total revenue equals $21 and total cost equals $17.

Question 7

Marketing refers to all the activities necessary for a firm to sell a product to a consumer.

Accepted Answer

A) True 
 B)False

Question 8

Figure 13-6
  
-Refer to Figure 13-6.Suppose Dell finds the relationship between the average total cost of producing notebook computers and the quantity of notebook computers produced is as shown by Figure 13-2.Dell will maximize profits if it produces ________ notebook computers per month.

Accepted Answer

A) 100,000 
B) 200,000 
C) 300,000 
D) Not enough information is given to determine the profit-maximizing quantity. 
A) 100,000 
B) 200,000 
C) 300,000 
D) Not enough information is given to determine the profit-maximizing quantity.

Question 9

In contrast with perfect competition, excess capacity characterizes monopolistic competition.Excess capacity is due to which of the following?

Accepted Answer

A) Monopolistically competitive firms produce at the minimum point on their average total cost curves. 
B) Monopolistically competitive firms face downward-sloping demand curves. In the long run, firms produce where their demand curves are tangent to their long-run average total cost curves. 
C) Monopolistically competitive firms produce where marginal revenue is equal to marginal cost. 
D) Monopolistically competitive markets have low barriers to entry. 
A) Monopolistically competitive firms produce at the minimum point on their average total cost curves. 
B) Monopolistically competitive firms face downward-sloping demand curves. In the long run, firms produce where their demand curves are tangent to their long-run average total cost curves. 
C) Monopolistically competitive firms produce where marginal revenue is equal to marginal cost. 
D) Monopolistically competitive markets have low barriers to entry.

Question 10

Figure 13-11
  
-Refer to Figure 13-11.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 11

Recent research has shown that the first firm to enter a market often does not have a long-term advantage over later entrants into the market.An example that has been used to illustrate this is

Accepted Answer

A) McDonald's entry into the high-end coffee market. 
B) Xerox, which became a generic term for making photocopies. 
C) Abercrombie and Fitch, which was the first clothing company to market to young men. 
D) the introduction of the first ballpoint pen in 1945. 
A) McDonald's entry into the high-end coffee market. 
B) Xerox, which became a generic term for making photocopies. 
C) Abercrombie and Fitch, which was the first clothing company to market to young men. 
D) the introduction of the first ballpoint pen in 1945.

Question 12

A monopolistically competitive firm that is profitable in the short run will face competition that will eventually eliminate the firm's profits in the long run.But the firm can stave off competition and continue to earn economic profits if

Accepted Answer

A) it can successfully sue its competitors for copyright infringement. 
B) it can move to another country where there is less competition. 
C) it can lobby the government to establish a price floor for its product. 
D) it can find new ways to differentiate its product. 
A) it can successfully sue its competitors for copyright infringement. 
B) it can move to another country where there is less competition. 
C) it can lobby the government to establish a price floor for its product. 
D) it can find new ways to differentiate its product.

Question 13

In long-run equilibrium, compared to a perfectly competitive market, a monopolistically competitive industry produces a ________ level of output and charges a ________ price.

Accepted Answer

A) higher; lower 
B) lower; lower 
C) lower; higher 
D) higher; higher 
A) higher; lower 
B) lower; lower 
C) lower; higher 
D) higher; higher

Question 14

A monopolistically competitive firm maximizes profit in the short run by producing where

Accepted Answer

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

Question 15

If the marginal revenue is negative then the revenue lost from receiving a lower price on all the units that could have been sold at the original price is smaller than the additional revenue from selling one more unit of the good.

Accepted Answer

A) True 
 B)False

Question 16

The table below shows the demand and cost data facing "Velvet Touches," a monopolistically competitive producer of velvet throw pillows.
   
Use the data to answer the following questions.
a.Complete the Total Revenue (TR), Marginal Revenue (MR), and Marginal Cost (MC)columns above.
b.What are the profit-maximizing price and quantity for Velvet Touches?
c.Is the firm making a profit or a loss? How much is the profit or loss? Show your work.
d.Is this firm operating in the long run or in the short run? Explain your answer.
e.If the firm's profit or loss is typical of all firms in the market for throw pillows, what is likely to happen in the future? Will there be more firms or will some existing firms leave the industry? Explain your answer.
f.What will happen to the typical firm's profit or loss after all entry/exit adjustments?

Accepted Answer

a.
 @#IMG-DLM& 
b.Q = 5; P = $22
c.Profit = $(110-

Question 17

Every firm that has the ability to affect the price of the good or service it sells will

Accepted Answer

A) have a perfectly elastic demand curve. 
B) have a marginal revenue curve that lies below its demand curve. 
C) earn a short-run profit but break even in the long run. 
D) shut down in the short run. 
A) have a perfectly elastic demand curve. 
B) have a marginal revenue curve that lies below its demand curve. 
C) earn a short-run profit but break even in the long run. 
D) shut down in the short run.

Question 18

For a profit-maximizing monopolistically competitive firm, for the last unit sold, the marginal cost of production is less than the marginal benefit received by a customer from the purchase of that unit.

Accepted Answer

A) True 
 B)False

Question 19

Economists have long debated whether there is a significant loss of well-being to society in markets that are monopolistically competitive rather than perfectly competitive.Which of the following offers the best reason why some economists believe that monopolistically competitive markets benefit consumers despite any loss of well-being?

Accepted Answer

A) Although consumers may pay a price greater than marginal cost for a product, the product is produced at the minimum average total cost. 
B) Although consumers may pay a price greater than marginal cost and the product is not produced at minimum average total cost, they benefit from being able to buy a differentiated product more closely suited to their tastes. 
C) Consumers pay a price equal to the marginal cost of producing a product, even though it is not produced at the minimum average total cost. 
D) Consumers are better off choosing from a variety of differentiated products, even though product differentiation causes barriers that restrict entry into monopolistically competitive markets. 
A) Although consumers may pay a price greater than marginal cost for a product, the product is produced at the minimum average total cost. 
B) Although consumers may pay a price greater than marginal cost and the product is not produced at minimum average total cost, they benefit from being able to buy a differentiated product more closely suited to their tastes. 
C) Consumers pay a price equal to the marginal cost of producing a product, even though it is not produced at the minimum average total cost. 
D) Consumers are better off choosing from a variety of differentiated products, even though product differentiation causes barriers that restrict entry into monopolistically competitive markets.

Question 20

Which of the following is true for a monopolistically competitive firm in long-run equilibrium?

Accepted Answer

A) P = ATC and MR = MC. 
B) P = ATC and P = MC. 
C) P > ATC and P > MR. 
D) P > MR and MC = ATC. 
A) P = ATC and MR = MC. 
B) P = ATC and P = MC. 
C) P > ATC and P > MR. 
D) P > MR and MC = ATC.

Which of the following characteristics is common to monopolistic competition and perfect competition?

Unlike a perfectly competitive firm, a monopolistic competitor does not have a short-run shut-down point.

In the long-run equilibrium, a monopolistically competitive firm earning normal profit produces the allocatively efficient output level.

A successful trademark is one that becomes a generic name for a product, for example, "Kleenex" has become a generic term for tissues.

If a monopolistically competitive firm breaks even, the firm is earning as much in this industry as it could in any other comparable industry.

Table 13-4 Table 13-4 lists estimated revenues and costs (per week)for plastic vials (100 vials per box)for the Victoria Biological Supplies Company. Victoria sells plastic vials to universities and private research laboratories. -Refer to Table 13-4.At Victoria's profit-maximizing output,

Marketing refers to all the activities necessary for a firm to sell a product to a consumer.

Figure 13-6 -Refer to Figure 13-6.Suppose Dell finds the relationship between the average total cost of producing notebook computers and the quantity of notebook computers produced is as shown by Figure 13-2.Dell will maximize profits if it produces ________ notebook computers per month.

In contrast with perfect competition, excess capacity characterizes monopolistic competition.Excess capacity is due to which of the following?

Figure 13-11 -Refer to Figure 13-11.The firm represented in the diagram

Recent research has shown that the first firm to enter a market often does not have a long-term advantage over later entrants into the market.An example that has been used to illustrate this is

A monopolistically competitive firm that is profitable in the short run will face competition that will eventually eliminate the firm's profits in the long run.But the firm can stave off competition and continue to earn economic profits if

In long-run equilibrium, compared to a perfectly competitive market, a monopolistically competitive industry produces a level of output and charges a price.

A monopolistically competitive firm maximizes profit in the short run by producing where

If the marginal revenue is negative then the revenue lost from receiving a lower price on all the units that could have been sold at the original price is smaller than the additional revenue from selling one more unit of the good.

Every firm that has the ability to affect the price of the good or service it sells will

For a profit-maximizing monopolistically competitive firm, for the last unit sold, the marginal cost of production is less than the marginal benefit received by a customer from the purchase of that unit.

Which of the following is true for a monopolistically competitive firm in long-run equilibrium?

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

The Economics of Health Care

Firms, the Stock Market, and Corporate Governance

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

Pricing Strategy

The Markets for Labor and Other Factors of Production

Public Choice, Taxes, and the Distribution of Income

Filters

Exam 13: Monopolistic Competition: the Competitive Model in a

Which of the following characteristics is common to monopolistic competition and perfect competition?

Unlike a perfectly competitive firm, a monopolistic competitor does not have a short-run shut-down point.

In the long-run equilibrium, a monopolistically competitive firm earning normal profit produces the allocatively efficient output level.

A successful trademark is one that becomes a generic name for a product, for example, "Kleenex" has become a generic term for tissues.

If a monopolistically competitive firm breaks even, the firm is earning as much in this industry as it could in any other comparable industry.

Table 13-4 Table 13-4 lists estimated revenues and costs (per week)for plastic vials (100 vials per box)for the Victoria Biological Supplies Company. Victoria sells plastic vials to universities and private research laboratories. -Refer to Table 13-4.At Victoria's profit-maximizing output,

Marketing refers to all the activities necessary for a firm to sell a product to a consumer.

Figure 13-6 -Refer to Figure 13-6.Suppose Dell finds the relationship between the average total cost of producing notebook computers and the quantity of notebook computers produced is as shown by Figure 13-2.Dell will maximize profits if it produces ________ notebook computers per month.

In contrast with perfect competition, excess capacity characterizes monopolistic competition.Excess capacity is due to which of the following?

Figure 13-11 -Refer to Figure 13-11.The firm represented in the diagram

Recent research has shown that the first firm to enter a market often does not have a long-term advantage over later entrants into the market.An example that has been used to illustrate this is

A monopolistically competitive firm that is profitable in the short run will face competition that will eventually eliminate the firm's profits in the long run.But the firm can stave off competition and continue to earn economic profits if

In long-run equilibrium, compared to a perfectly competitive market, a monopolistically competitive industry produces a ________ level of output and charges a ________ price.

A monopolistically competitive firm maximizes profit in the short run by producing where

If the marginal revenue is negative then the revenue lost from receiving a lower price on all the units that could have been sold at the original price is smaller than the additional revenue from selling one more unit of the good.

Every firm that has the ability to affect the price of the good or service it sells will

For a profit-maximizing monopolistically competitive firm, for the last unit sold, the marginal cost of production is less than the marginal benefit received by a customer from the purchase of that unit.

Which of the following is true for a monopolistically competitive firm in long-run equilibrium?

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

The Economics of Health Care

Firms, the Stock Market, and Corporate Governance

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

Pricing Strategy

The Markets for Labor and Other Factors of Production

Public Choice, Taxes, and the Distribution of Income

Filters

In long-run equilibrium, compared to a perfectly competitive market, a monopolistically competitive industry produces a level of output and charges a price.