Question 1

For a monopolistically competitive firm, the demand curve

Accepted Answer

A) is a horizontal line. 
B) has a positive slope. 
C) is vertical. 
D) has a negative slope. 
E) is the same as the marginal revenue curve. 
A) is a horizontal line. 
B) has a positive slope. 
C) is vertical. 
D) has a negative slope. 
E) is the same as the marginal revenue curve.

Question 2

The women's dress industry is monopolistically competitive because each firm has

Accepted Answer

A) a large market share. 
B) a very small market share. 
C) no market share. 
D) no competition for their market share. 
E) struck a deal with the many other firms about what price will be charged. 
A) a large market share. 
B) a very small market share. 
C) no market share. 
D) no competition for their market share. 
E) struck a deal with the many other firms about what price will be charged.

Question 3

If the Herfindahl-Hirschman Index for an industry is 8,528, is the industry competitive or concentrated?

Accepted Answer

With a Herfindahl-Hirschman In

Question 4

Which of the following is correct?

Accepted Answer

A) A firm in monopolistic competition does not have excess capacity in the long run. 
B) A firm in perfect competition operates at maximum average total cost in the long run. 
C) In the long run, a firm in monopolistic competition maximizes its profit at a point where price is equal to average total cost but the average total cost is not minimized. 
D) In the long run, a firm in monopolistic competition makes zero economic profit and its price is equal to the minimum average total cost. 
E) In the long run, a firm in monopolistic competition can make an economic profit because of product differentiation. 
A) A firm in monopolistic competition does not have excess capacity in the long run. 
B) A firm in perfect competition operates at maximum average total cost in the long run. 
C) In the long run, a firm in monopolistic competition maximizes its profit at a point where price is equal to average total cost but the average total cost is not minimized. 
D) In the long run, a firm in monopolistic competition makes zero economic profit and its price is equal to the minimum average total cost. 
E) In the long run, a firm in monopolistic competition can make an economic profit because of product differentiation.

Question 5

What is the Herfindahl-Hirschman Index if the four firms in an industry account have market shares of 62 percent, 15 percent, 15 percent, and 8 percent?

Accepted Answer

A) 100 
B) 4,358 
C) 111,600 
D) 2,822 
E) 6,200 
A) 100 
B) 4,358 
C) 111,600 
D) 2,822 
E) 6,200

Question 6

Why are selling costs high in monopolistic competition?

Accepted Answer

In monopolistic competition, there are a

Question 7

A monopolistically competitive firm is inefficient because the firm

Accepted Answer

A) makes positive economic profit in the long run. 
B) is producing at an output where marginal cost equals price. 
C) is not maximizing its profits. 
D) produces a product identical to that of its competitors. 
E) produces at an output level where average total cost is not at its minimum. 
A) makes positive economic profit in the long run. 
B) is producing at an output where marginal cost equals price. 
C) is not maximizing its profits. 
D) produces a product identical to that of its competitors. 
E) produces at an output level where average total cost is not at its minimum.

Question 8

In long-run equilibrium, a firm in monopolistic competition makes

Accepted Answer

A) an economic profit but the economic profit is less than it would be if the firm was a monopoly. 
B) an economic profit that is higher than what it would be if the firm was a monopoly. 
C) zero economic profit. 
D) an economic profit that is the same amount as it would be if the firm was a monopoly. 
E) an economic profit, an economic loss, or zero economic profit. 
A) an economic profit but the economic profit is less than it would be if the firm was a monopoly. 
B) an economic profit that is higher than what it would be if the firm was a monopoly. 
C) zero economic profit. 
D) an economic profit that is the same amount as it would be if the firm was a monopoly. 
E) an economic profit, an economic loss, or zero economic profit.

Question 9

Which of the following is the best example of a differentiated product?

Accepted Answer

A) beets in the local supermarket 
B) diamonds 
C) airlines 
D) running shoes 
E) electricity 
A) beets in the local supermarket 
B) diamonds 
C) airlines 
D) running shoes 
E) electricity

Question 10

In a market in which firms operate in monopolistic competition,

Accepted Answer

A) the HHI for a single firm exceeds 2500. 
B) firms compete on price, quality and marketing. 
C) in the long run firms produce at their efficient scale. 
D) in the long run firms are not able to charge a markup. 
E) advertising is nonexistent. 
A) the HHI for a single firm exceeds 2500. 
B) firms compete on price, quality and marketing. 
C) in the long run firms produce at their efficient scale. 
D) in the long run firms are not able to charge a markup. 
E) advertising is nonexistent.

Question 11

The four largest firms in an industry account for the following value of industry revenues: 12 percent, 8 percent, 5 percent and 4 percent.Calculate the four-firm concentration ratio.Would this industry be regarded as competitive or concentrated?

Accepted Answer

The four-firm concentration ra

Question 12

If a firm in monopolistic competition is making an economic profit,

Accepted Answer

A) it is in the long run. 
B) other firms can enter the market. 
C) it can do so because it is "monopolistic" and other firms will have a hard time competing with it. 
D) its average cost must exceed its marginal cost. 
E) The question errs because firms in monopolistic competition cannot make an economic profit. 
A) it is in the long run. 
B) other firms can enter the market. 
C) it can do so because it is "monopolistic" and other firms will have a hard time competing with it. 
D) its average cost must exceed its marginal cost. 
E) The question errs because firms in monopolistic competition cannot make an economic profit.

Question 13

In the long run, a firm in monopolistic competition will produce

Accepted Answer

A) where average total cost is minimized. 
B) where price equals average total cost but average total cost is not at its minimum. 
C) zero output. 
D) any possible amount of output. 
E) where price equals marginal cost. 
A) where average total cost is minimized. 
B) where price equals average total cost but average total cost is not at its minimum. 
C) zero output. 
D) any possible amount of output. 
E) where price equals marginal cost.

Question 14

Why does a firm in monopolistic competition make zero economic profit rather than an economic profit in the long run?

Accepted Answer

Entry into monopolistically competitive

Question 15

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 16

Even though monopolistic competition results in inefficiency, it does have which of the following benefits for society?

Accepted Answer

A) Firms make zero economic profit in the long run. 
B) Firms can make an economic profit in the short run. 
C) Product variety benefits consumers. 
D) Marginal cost equals price in the long run. 
E) The premise of the question is incorrect because nothing in monopolistic competition justifies any economic inefficiency. 
A) Firms make zero economic profit in the long run. 
B) Firms can make an economic profit in the short run. 
C) Product variety benefits consumers. 
D) Marginal cost equals price in the long run. 
E) The premise of the question is incorrect because nothing in monopolistic competition justifies any economic inefficiency.

Question 17

Product differentiation means

Accepted Answer

A) making a product that has perfect substitutes. 
B) making a product that is entirely unique. 
C) the inability to set your own price. 
D) making a product that is slightly different from products of competing firms. 
E) making your demand curve horizontal. 
A) making a product that has perfect substitutes. 
B) making a product that is entirely unique. 
C) the inability to set your own price. 
D) making a product that is slightly different from products of competing firms. 
E) making your demand curve horizontal.

Question 18

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 19

Explain how selling costs in monopolistic competition affect the efficiency of monopolistic competition.

Accepted Answer

The additional selling costs from produc

Question 20

The three largest firms in an industry have market shares of 40 percent, 30 percent, and 2 percent.The remaining 47 firms in the industry each have a market share of 1 percent.The Herfindahl-Hirschman Index (HHI)for this industry is ________.

Accepted Answer

A) 2,551 
B) 5,184 
C) 24,061 
D) 10,000 
E) 3,013 
A) 2,551 
B) 5,184 
C) 24,061 
D) 10,000 
E) 3,013

For a monopolistically competitive firm, the demand curve

The women's dress industry is monopolistically competitive because each firm has

If the Herfindahl-Hirschman Index for an industry is 8,528, is the industry competitive or concentrated?

Which of the following is correct?

What is the Herfindahl-Hirschman Index if the four firms in an industry account have market shares of 62 percent, 15 percent, 15 percent, and 8 percent?

Why are selling costs high in monopolistic competition?

A monopolistically competitive firm is inefficient because the firm

In long-run equilibrium, a firm in monopolistic competition makes

Which of the following is the best example of a differentiated product?

In a market in which firms operate in monopolistic competition,

The four largest firms in an industry account for the following value of industry revenues: 12 percent, 8 percent, 5 percent and 4 percent.Calculate the four-firm concentration ratio.Would this industry be regarded as competitive or concentrated?

If a firm in monopolistic competition is making an economic profit,

In the long run, a firm in monopolistic competition will produce

Why does a firm in monopolistic competition make zero economic profit rather than an economic profit in the long run?

In the long run in monopolistic competition, firms

Even though monopolistic competition results in inefficiency, it does have which of the following benefits for society?

Product differentiation means

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

Explain how selling costs in monopolistic competition affect the efficiency of monopolistic competition.

The three largest firms in an industry have market shares of 40 percent, 30 percent, and 2 percent.The remaining 47 firms in the industry each have a market share of 1 percent.The Herfindahl-Hirschman Index (HHI)for this industry is ________.

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

For a monopolistically competitive firm, the demand curve

The women's dress industry is monopolistically competitive because each firm has

If the Herfindahl-Hirschman Index for an industry is 8,528, is the industry competitive or concentrated?

Which of the following is correct?

What is the Herfindahl-Hirschman Index if the four firms in an industry account have market shares of 62 percent, 15 percent, 15 percent, and 8 percent?

Why are selling costs high in monopolistic competition?

A monopolistically competitive firm is inefficient because the firm

In long-run equilibrium, a firm in monopolistic competition makes

Which of the following is the best example of a differentiated product?

In a market in which firms operate in monopolistic competition,

The four largest firms in an industry account for the following value of industry revenues: 12 percent, 8 percent, 5 percent and 4 percent.Calculate the four-firm concentration ratio.Would this industry be regarded as competitive or concentrated?

If a firm in monopolistic competition is making an economic profit,

In the long run, a firm in monopolistic competition will produce

Why does a firm in monopolistic competition make zero economic profit rather than an economic profit in the long run?

In the long run in monopolistic competition, firms

Even though monopolistic competition results in inefficiency, it does have which of the following benefits for society?

Product differentiation means

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

Explain how selling costs in monopolistic competition affect the efficiency of monopolistic competition.

The three largest firms in an industry have market shares of 40 percent, 30 percent, and 2 percent.The remaining 47 firms in the industry each have a market share of 1 percent.The Herfindahl-Hirschman Index (HHI)for this industry is ________.

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.