Question 1

If a monopolistically competitive seller's marginal cost is $3.56, the firm will increase 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) average total cost is less than $3.56. 
E) Both answers A 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) average total cost is less than $3.56. 
E) Both answers A and D are correct.

Question 2

The freedom of entry and exit in monopolistic competition means that firms

Accepted Answer

A) enter the market when economic losses are being incurred. 
B) exit the market when economic profits are being made. 
C) enter the market when firms are making zero economic profit. 
D) can enter a market to compete for economic profits and leave when economic losses are being incurred. 
E) find it easy to permanently make an economic profit. 
A) enter the market when economic losses are being incurred. 
B) exit the market when economic profits are being made. 
C) enter the market when firms are making zero economic profit. 
D) can enter a market to compete for economic profits and leave when economic losses are being incurred. 
E) find it easy to permanently make an economic profit.

Question 3

Firms in monopolistic competition determine the profit-maximizing level of output by producing

Accepted Answer

A) the same output level as rivals do. 
B) where average total cost is minimized. 
C) at the point of minimum average fixed cost. 
D) where marginal revenue equals marginal cost. 
E) where price equals average total cost. 
A) the same output level as rivals do. 
B) where average total cost is minimized. 
C) at the point of minimum average fixed cost. 
D) where marginal revenue equals marginal cost. 
E) where price equals average total cost.

Question 4

In both monopolistic competition and perfect competition,

Accepted Answer

A) firms sell identical products. 
B) there is easy entry and exit. 
C) firms are price takers. 
D) firms face horizontal demand curves. 
E) the marginal revenue curve and the demand curve are the same. 
A) firms sell identical products. 
B) there is easy entry and exit. 
C) firms are price takers. 
D) firms face horizontal demand curves. 
E) the marginal revenue curve and the demand curve are the same.

Question 5

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 6

In monopolistic competition, a firm can set the price for its product because of

Accepted Answer

A) easy entry and exit. 
B) economic profits. 
C) product differentiation. 
D) many competitors. 
E) the firm's upward sloping demand curve. 
A) easy entry and exit. 
B) economic profits. 
C) product differentiation. 
D) many competitors. 
E) the firm's upward sloping demand curve.

Question 7

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 8

A firm in monopolistic competition ________ influence its price and ________ influence the market average price.

Accepted Answer

A) can; can 
B) can; cannot 
C) cannot; can 
D) cannot; cannot 
E) can; only in the short run can 
A) can; can 
B) can; cannot 
C) cannot; can 
D) cannot; cannot 
E) can; only in the short run can

Question 9

Advertising costs and other selling costs are

Accepted Answer

A) efficient. 
B) fixed costs. 
C) variable costs. 
D) marginal costs. 
E) considered as part of demand because they affect the demand for the good. 
A) efficient. 
B) fixed costs. 
C) variable costs. 
D) marginal costs. 
E) considered as part of demand because they affect the demand for the good.

Question 10

What is excess capacity? What industry has excess capacity in the long run: perfect competition or monopolistic competition?

Accepted Answer

The efficient scale of output is the lev

Question 11

A firm in monopolistic competition that introduces a new and differentiated product will temporarily have a ________ demand for its product and is able to charge a ________.

Accepted Answer

A) less elastic; a lower price than before 
B) less elastic; a higher price than before 
C) more elastic; a lower price than before 
D) more elastic; a higher price than before 
E) less elastic; the same price as before 
A) less elastic; a lower price than before 
B) less elastic; a higher price than before 
C) more elastic; a lower price than before 
D) more elastic; a higher price than before 
E) less elastic; the same price as before

Question 12

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 13

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.

If a monopolistically competitive seller's marginal cost is $3.56, the firm will increase its output if

The freedom of entry and exit in monopolistic competition means that firms

Firms in monopolistic competition determine the profit-maximizing level of output by producing

In both monopolistic competition and perfect competition,

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

In monopolistic competition, a firm can set the price for its product because of

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.

A firm in monopolistic competition influence its price and influence the market average price.

Advertising costs and other selling costs are

What is excess capacity? What industry has excess capacity in the long run: perfect competition or monopolistic competition?

A firm in monopolistic competition that introduces a new and differentiated product will temporarily have a demand for its product and is able to charge a .

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

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

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Government Actions in Markets

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Global Markets in Action

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Exam 17: Monopolistic Competition

If a monopolistically competitive seller's marginal cost is $3.56, the firm will increase its output if

The freedom of entry and exit in monopolistic competition means that firms

Firms in monopolistic competition determine the profit-maximizing level of output by producing

In both monopolistic competition and perfect competition,

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

In monopolistic competition, a firm can set the price for its product because of

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.

A firm in monopolistic competition ________ influence its price and ________ influence the market average price.

Advertising costs and other selling costs are

What is excess capacity? What industry has excess capacity in the long run: perfect competition or monopolistic competition?

A firm in monopolistic competition that introduces a new and differentiated product will temporarily have a ________ demand for its product and is able to charge a ________.

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

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

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

A firm in monopolistic competition influence its price and influence the market average price.

A firm in monopolistic competition that introduces a new and differentiated product will temporarily have a demand for its product and is able to charge a .