Question 1

A firm in monopolistic competition maximizes profit by equating

Accepted Answer

A) price and marginal revenue. 
B) price and marginal cost. 
C) demand and marginal cost. 
D) marginal revenue and marginal cost. 
E) price and average total cost. 
A) price and marginal revenue. 
B) price and marginal cost. 
C) demand and marginal cost. 
D) marginal revenue and marginal cost. 
E) price and average total cost.

Question 2

If a monopolistically competitive seller's marginal cost is $3.56, the firm will not change 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) its average total cost is equal to $3.56. 
E) Both answers B 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) its average total cost is equal to $3.56. 
E) Both answers B and D are correct.

Question 3

The primary reason why monopolistically competitive firms cannot make an economic profit in the long run is because

Accepted Answer

A) there are barriers to entry. 
B) there is freedom of entry. 
C) the antitrust laws prevent profit from increasing. 
D) recessions occur. 
E) they collude to make a normal profit. 
A) there are barriers to entry. 
B) there is freedom of entry. 
C) the antitrust laws prevent profit from increasing. 
D) recessions occur. 
E) they collude to make a normal profit.

Question 4

The marginal revenue curve facing a monopolistically competitive firm

Accepted Answer

A) lies on its demand curve. 
B) lies above its demand curve. 
C) lies below its demand curve. 
D) is equal to its price curve. 
E) is parallel to its demand curve. 
A) lies on its demand curve. 
B) lies above its demand curve. 
C) lies below its demand curve. 
D) is equal to its price curve. 
E) is parallel to its demand curve.

Question 5

Which of the following four-firm concentration ratios would be the best indication of a perfectly competitive industry?

Accepted Answer

A) 2 percent 
B) 31 percent 
C) 78 percent 
D) 100 percent 
E) 50 percent 
A) 2 percent 
B) 31 percent 
C) 78 percent 
D) 100 percent 
E) 50 percent

Question 6

-The demand and cost schedules for a firm in monopolistic competition are in the above tables.What is the profit-maximizing level of output and price? What amount of profit is the firm making? Is this firm in a short-run or long-run equilibrium? Why?

Accepted Answer

To determine the quantity produced, the

Question 7

To maximize profit, a firm in monopolistic competition will produce the quantity where marginal revenue

Accepted Answer

A) is greater than marginal cost. 
B) equals zero. 
C) is less than marginal cost. 
D) equals marginal cost. 
E) equals average total cost. 
A) is greater than marginal cost. 
B) equals zero. 
C) is less than marginal cost. 
D) equals marginal cost. 
E) equals average total cost.

Question 8

Firms decide how much to spend on product development and marketing by

Accepted Answer

A) spending the same amount as they did in previous years. 
B) spending the historical average of 1/4 of total production cost. 
C) determining what it will take to eliminate excess capacity. 
D) balancing the cost and the benefit of product development and marketing. 
E) ensuring that the marginal cost of product development and marketing is less than or equal to the marginal cost of producing the good or service. 
A) spending the same amount as they did in previous years. 
B) spending the historical average of 1/4 of total production cost. 
C) determining what it will take to eliminate excess capacity. 
D) balancing the cost and the benefit of product development and marketing. 
E) ensuring that the marginal cost of product development and marketing is less than or equal to the marginal cost of producing the good or service.

Question 9

Nike is a firm in monopolistic competition.If Nike is making an economic profit from new cross-training shoe, over time the demand for these shoes

Accepted Answer

A) increases as new firms enter the market. 
B) decreases as new firms enter the market. 
C) does not change as new firms enter the market. 
D) decreases as firms exit the market. 
E) increases as firms exit the market. 
A) increases as new firms enter the market. 
B) decreases as new firms enter the market. 
C) does not change as new firms enter the market. 
D) decreases as firms exit the market. 
E) increases as firms exit the market.

Question 10

Which of the following four-firm concentration ratios would be the best indicator of an oligopoly?

Accepted Answer

A) 0.25 percent 
B) 31 percent 
C) 78 percent 
D) 100 percent 
E) 11 percent 
A) 0.25 percent 
B) 31 percent 
C) 78 percent 
D) 100 percent 
E) 11 percent

Question 11

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 12

Which of the following is true of monopolistic competition in long-run equilibrium?

Accepted Answer

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

Question 13

-The above figure represents a restaurant operating in monopolistic competition.
a∙What is the profit-maximizing level of output?
b∙What price will the firm charge?
c∙What is the firm's profit (or loss)?
d∙Is this a long-run equilibrium? Why or why not?
e∙Is this firm producing its efficient scale of output?

Accepted Answer

a∙The quantity is 20 meals a day.
b∙The

Question 14

Product differentiation allows a firm to compete with another firm on the basis of

Accepted Answer

A) efficiency. 
B) elasticity. 
C) quality, price, and marketing. 
D) the level of output and the price. 
E) demand. 
A) efficiency. 
B) elasticity. 
C) quality, price, and marketing. 
D) the level of output and the price. 
E) demand.

Question 15

A sunglass manufacturer spends a lot of money to promote its brand name.This promotion ________ consumers because ________.

Accepted Answer

A) helps; it lowers marginal cost 
B) harms; definitely increases average total cost 
C) helps; it provides a signal and information about the sunglasses 
D) harms; increases the elasticity of demand 
E) helps; it is a fixed cost and not a variable cost 
A) helps; it lowers marginal cost 
B) harms; definitely increases average total cost 
C) helps; it provides a signal and information about the sunglasses 
D) harms; increases the elasticity of demand 
E) helps; it is a fixed cost and not a variable cost

Question 16

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 17

Advertising is a ________ cost that is incurred by ________.

Accepted Answer

A) variable; monopolies 
B) variable; perfectly competitive firms 
C) fixed; perfectly competitive firms 
D) fixed; monopolistically competitive firms 
E) marginal; monopolistically competitive firms 
A) variable; monopolies 
B) variable; perfectly competitive firms 
C) fixed; perfectly competitive firms 
D) fixed; monopolistically competitive firms 
E) marginal; monopolistically competitive firms

Question 18

In monopolistic competition, each firm supplies a small part of the market.This occurs because

Accepted Answer

A) there are barriers to entry. 
B) there are no barriers to exit. 
C) there are a large number of firms. 
D) firms produce differentiated products. 
E) there are a large number of buyers. 
A) there are barriers to entry. 
B) there are no barriers to exit. 
C) there are a large number of firms. 
D) firms produce differentiated products. 
E) there are a large number of buyers.

Question 19

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 20

In monopolistic competition there are ________ barriers to entry, so therefore in the long run, economic profit ________.

Accepted Answer

A) no; is substantial 
B) no; equals zero 
C) many; equals zero 
D) many; is substantial 
E) many; might be earned depending on the degree of product differentiation 
A) no; is substantial 
B) no; equals zero 
C) many; equals zero 
D) many; is substantial 
E) many; might be earned depending on the degree of product differentiation

A firm in monopolistic competition maximizes profit by equating

If a monopolistically competitive seller's marginal cost is $3.56, the firm will not change its output if

The primary reason why monopolistically competitive firms cannot make an economic profit in the long run is because

The marginal revenue curve facing a monopolistically competitive firm

Which of the following four-firm concentration ratios would be the best indication of a perfectly competitive industry?

-The demand and cost schedules for a firm in monopolistic competition are in the above tables.What is the profit-maximizing level of output and price? What amount of profit is the firm making? Is this firm in a short-run or long-run equilibrium? Why?

To maximize profit, a firm in monopolistic competition will produce the quantity where marginal revenue

Firms decide how much to spend on product development and marketing by

Nike is a firm in monopolistic competition.If Nike is making an economic profit from new cross-training shoe, over time the demand for these shoes

Which of the following four-firm concentration ratios would be the best indicator of an oligopoly?

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

Which of the following is true of monopolistic competition in long-run equilibrium?

Product differentiation allows a firm to compete with another firm on the basis of

A sunglass manufacturer spends a lot of money to promote its brand name.This promotion consumers because .

Because of product differentiation, firms

Advertising is a cost that is incurred by .

In monopolistic competition, each firm supplies a small part of the market.This occurs because

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

In monopolistic competition there are barriers to entry, so therefore in the long run, economic profit .

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

A firm in monopolistic competition maximizes profit by equating

If a monopolistically competitive seller's marginal cost is $3.56, the firm will not change its output if

The primary reason why monopolistically competitive firms cannot make an economic profit in the long run is because

The marginal revenue curve facing a monopolistically competitive firm

Which of the following four-firm concentration ratios would be the best indication of a perfectly competitive industry?

-The demand and cost schedules for a firm in monopolistic competition are in the above tables.What is the profit-maximizing level of output and price? What amount of profit is the firm making? Is this firm in a short-run or long-run equilibrium? Why?

To maximize profit, a firm in monopolistic competition will produce the quantity where marginal revenue

Firms decide how much to spend on product development and marketing by

Nike is a firm in monopolistic competition.If Nike is making an economic profit from new cross-training shoe, over time the demand for these shoes

Which of the following four-firm concentration ratios would be the best indicator of an oligopoly?

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

Which of the following is true of monopolistic competition in long-run equilibrium?

Product differentiation allows a firm to compete with another firm on the basis of

A sunglass manufacturer spends a lot of money to promote its brand name.This promotion ________ consumers because ________.

Because of product differentiation, firms

Advertising is a ________ cost that is incurred by ________.

In monopolistic competition, each firm supplies a small part of the market.This occurs because

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

In monopolistic competition there are ________ barriers to entry, so therefore in the long run, economic profit ________.

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 sunglass manufacturer spends a lot of money to promote its brand name.This promotion consumers because .

Advertising is a cost that is incurred by .

In monopolistic competition there are barriers to entry, so therefore in the long run, economic profit .