Question 1

For a firm in monopolistic competition, selling costs

Accepted Answer

A) increase costs and reduce profits. 
B) always increase demand. 
C) can change the quantity produced and lower the average total cost. 
D) can lower total cost. 
E) has no effect on the quantity sold. 
A) increase costs and reduce profits. 
B) always increase demand. 
C) can change the quantity produced and lower the average total cost. 
D) can lower total cost. 
E) has no effect on the quantity sold.

Question 2

Monopolistic competition is efficient when compared to

Accepted Answer

A) to perfect competition. 
B) complete product uniformity. 
C) the short run. 
D) the long run. 
E) None of the above answers is correct. 
A) to perfect competition. 
B) complete product uniformity. 
C) the short run. 
D) the long run. 
E) None of the above answers is correct.

Question 3

In the long run, a firm in monopolistic competition ________ a markup of price over marginal cost and a firm in perfect competition ________ a markup of price over marginal cost.

Accepted Answer

A) has; has 
B) has; does not have 
C) does not have; has 
D) does not have; does not have 
E) might have; might have 
A) has; has 
B) has; does not have 
C) does not have; has 
D) does not have; does not have 
E) might have; might have

Question 4

Why would a firm in a monopolistically competitive industry advertise?

Accepted Answer

Similar to virtually every other busines

Question 5

If you have found the percentage of the value of total revenue accounted for by the four largest firms in an industry, you have found the

Accepted Answer

A) elasticity of demand value. 
B) elasticity of supply value. 
C) Herfindahl-Hirschman Index. 
D) four-firm concentration ratio. 
E) monopolistic concentration index. 
A) elasticity of demand value. 
B) elasticity of supply value. 
C) Herfindahl-Hirschman Index. 
D) four-firm concentration ratio. 
E) monopolistic concentration index.

Question 6

-An industry has only four firms, who have market shares of 45 percent, 25 percent, 20 percent, and 10 percent.What is the Herfindahl-Hirschman Index?

Accepted Answer

The Herfin

Question 7

In an industry with a large number of firms,

Accepted Answer

A) each firm will produce a large quantity, relative to market demand. 
B) one firm will dominate the market. 
C) collusion is impossible. 
D) competition is eliminated. 
E) barriers to exit must exist. 
A) each firm will produce a large quantity, relative to market demand. 
B) one firm will dominate the market. 
C) collusion is impossible. 
D) competition is eliminated. 
E) barriers to exit must exist.

Question 8

How do advertising and other selling costs affect a firm?

Accepted Answer

A) They shift the marginal cost curve upward. 
B) The only effect is that the excess capacity is reduced. 
C) The only effect is that the demand for the product increases. 
D) They shift the average total cost curve upward. 
E) They do not change demand and shift the average total cost curve downward. 
A) They shift the marginal cost curve upward. 
B) The only effect is that the excess capacity is reduced. 
C) The only effect is that the demand for the product increases. 
D) They shift the average total cost curve upward. 
E) They do not change demand and shift the average total cost curve downward.

Question 9

In monopolistic competition, the presence of a large number of firms making a differentiated product means that

Accepted Answer

A) each firm can set the price of its particular product. 
B) each firm must charge the same price. 
C) the price is established by collusive behavior. 
D) each firm must produce the same quantity. 
E) firms cannot compete with each other on the basis of price. 
A) each firm can set the price of its particular product. 
B) each firm must charge the same price. 
C) the price is established by collusive behavior. 
D) each firm must produce the same quantity. 
E) firms cannot compete with each other on the basis of price.

Question 10

What is the Herfindahl-Hirschman Index and what does it measure?

Accepted Answer

The Herfindahl-Hirschman Index, or HHI,

Question 11

The U.S.Justice Department

Accepted Answer

A) scrutinizes any merger of firms in a market in which the four-firm concentration exceeds 25 percent. 
B) uses only the Herfindahl-Hirschman Index when considering whether to challenge a merger. 
C) is likely to challenge a merger if the Herfindahl-Hirschman Index exceeds 1800. 
D) Answers A and B are correct. 
E) Answers B and C are correct. 
A) scrutinizes any merger of firms in a market in which the four-firm concentration exceeds 25 percent. 
B) uses only the Herfindahl-Hirschman Index when considering whether to challenge a merger. 
C) is likely to challenge a merger if the Herfindahl-Hirschman Index exceeds 1800. 
D) Answers A and B are correct. 
E) Answers B and C are correct.

Question 12

Monopolistic competition is a market structure in which

Accepted Answer

A) firms face barriers to entry. 
B) a large number of firms compete. 
C) firms produce and sell an identical product. 
D) firms face perfectly elastic demand for their product. 
E) the firms have no ability to influence the price of their product. 
A) firms face barriers to entry. 
B) a large number of firms compete. 
C) firms produce and sell an identical product. 
D) firms face perfectly elastic demand for their product. 
E) the firms have no ability to influence the price of their product.

Question 13

The Herfindahl-Hirschman Index is used as a guideline to determine if a market is competitive or concentrated.Calculate the index value for each market described below.
a∙100 firms, each of which produces 1 per cent of market output
b∙50 firms, each of which produces 2 per cent of market output
c∙25 firms, each of which produces 4 per cent of market output
d∙20 firms, each of which produces 5 per cent of market output
e∙10 firms, each of which produces 10 per cent of market output
f∙5 firms, each of which produces 20 per cent of market output
g∙2 firms, each of which produces 50 per cent of market output

Accepted Answer

a∙100 × 1 = 100
b∙50 × 4 = 200

Question 14

If a firm in the long run produces less than its efficient scale, it

Accepted Answer

A) should raise its markup to increase its profit. 
B) should lower its markup to increase its profit. 
C) cannot be a perfectly competitive firm. 
D) should not advertise to increase its profit. 
E) must have its markup equal to zero. 
A) should raise its markup to increase its profit. 
B) should lower its markup to increase its profit. 
C) cannot be a perfectly competitive firm. 
D) should not advertise to increase its profit. 
E) must have its markup equal to zero.

Question 15

It would be impossible for members of the fast-food industry to collude to fix prices because

Accepted Answer

A) there are too many fast-food firms in the market. 
B) fast food is not durable. 
C) there are not enough fast-food firms in the market. 
D) the price of fast-food is too low. 
E) demanders would not buy from firms that collude. 
A) there are too many fast-food firms in the market. 
B) fast food is not durable. 
C) there are not enough fast-food firms in the market. 
D) the price of fast-food is too low. 
E) demanders would not buy from firms that collude.

Question 16

How would a merger between Coca-Cola and Pepsi Cola affect the four-firm concentration ratio for the soft drink market? How would it affect the Herfindahl-Hirschman Index for the soft drink market?

Accepted Answer

Both Coca-Cola and Pepsi Cola are among

Question 17

-Kevin owns a personal training gymnasium in Orlando.The above figure shows the demand and cost curves for his firm, which competes in a monopolistically competitive market.Kevin will train how many clients per day?

Accepted Answer

A) 4 
B) 6 
C) 10 
D) between 2 and 4 
E) None of the above answers is correct. 
A) 4 
B) 6 
C) 10 
D) between 2 and 4 
E) None of the above answers is correct.

Question 18

Excess capacity is the

Accepted Answer

A) difference between a perfectly competitive firm's and a monopolistically competitive firm's output. 
B) difference between a perfectly competitive firm's and a monopoly's output. 
C) output at the maximum point of the ATC curve. 
D) difference between the price charged by a monopoly and a monopolistically competitive firm with the same costs. 
E) None of the above answers is correct. 
A) difference between a perfectly competitive firm's and a monopolistically competitive firm's output. 
B) difference between a perfectly competitive firm's and a monopoly's output. 
C) output at the maximum point of the ATC curve. 
D) difference between the price charged by a monopoly and a monopolistically competitive firm with the same costs. 
E) None of the above answers is correct.

Question 19

In the long run, a firm in monopolistic competition ________ excess capacity and a firm in perfect competition ________ excess capacity.

Accepted Answer

A) has; has 
B) has; does not have 
C) does not have; has 
D) does not have; does not have 
E) might have; might have 
A) has; has 
B) has; does not have 
C) does not have; has 
D) does not have; does not have 
E) might have; might have

Question 20

-An industry's total revenue is $100 million.The above table shows the total revenue of the four largest firms in an industry.
a∙Calculate this industry's four-firm concentration ratio.
b∙Is this industry competitive?
c∙What market type does it most likely represent?

Accepted Answer

a∙The four-firm concentration

For a firm in monopolistic competition, selling costs

Monopolistic competition is efficient when compared to

In the long run, a firm in monopolistic competition a markup of price over marginal cost and a firm in perfect competition a markup of price over marginal cost.

Why would a firm in a monopolistically competitive industry advertise?

If you have found the percentage of the value of total revenue accounted for by the four largest firms in an industry, you have found the

-An industry has only four firms, who have market shares of 45 percent, 25 percent, 20 percent, and 10 percent.What is the Herfindahl-Hirschman Index?

In an industry with a large number of firms,

How do advertising and other selling costs affect a firm?

In monopolistic competition, the presence of a large number of firms making a differentiated product means that

What is the Herfindahl-Hirschman Index and what does it measure?

The U.S.Justice Department

Monopolistic competition is a market structure in which

If a firm in the long run produces less than its efficient scale, it

It would be impossible for members of the fast-food industry to collude to fix prices because

How would a merger between Coca-Cola and Pepsi Cola affect the four-firm concentration ratio for the soft drink market? How would it affect the Herfindahl-Hirschman Index for the soft drink market?

-Kevin owns a personal training gymnasium in Orlando.The above figure shows the demand and cost curves for his firm, which competes in a monopolistically competitive market.Kevin will train how many clients per day?

Excess capacity is the

In the long run, a firm in monopolistic competition excess capacity and a firm in perfect competition excess capacity.

-An industry's total revenue is $100 million.The above table shows the total revenue of the four largest firms in an industry. a∙Calculate this industry's four-firm concentration ratio. b∙Is this industry competitive? c∙What market type does it most likely represent?

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 firm in monopolistic competition, selling costs

Monopolistic competition is efficient when compared to

In the long run, a firm in monopolistic competition ________ a markup of price over marginal cost and a firm in perfect competition ________ a markup of price over marginal cost.

Why would a firm in a monopolistically competitive industry advertise?

If you have found the percentage of the value of total revenue accounted for by the four largest firms in an industry, you have found the

-An industry has only four firms, who have market shares of 45 percent, 25 percent, 20 percent, and 10 percent.What is the Herfindahl-Hirschman Index?

In an industry with a large number of firms,

How do advertising and other selling costs affect a firm?

In monopolistic competition, the presence of a large number of firms making a differentiated product means that

What is the Herfindahl-Hirschman Index and what does it measure?

The U.S.Justice Department

Monopolistic competition is a market structure in which

If a firm in the long run produces less than its efficient scale, it

It would be impossible for members of the fast-food industry to collude to fix prices because

How would a merger between Coca-Cola and Pepsi Cola affect the four-firm concentration ratio for the soft drink market? How would it affect the Herfindahl-Hirschman Index for the soft drink market?

-Kevin owns a personal training gymnasium in Orlando.The above figure shows the demand and cost curves for his firm, which competes in a monopolistically competitive market.Kevin will train how many clients per day?

Excess capacity is the

In the long run, a firm in monopolistic competition ________ excess capacity and a firm in perfect competition ________ excess capacity.

-An industry's total revenue is $100 million.The above table shows the total revenue of the four largest firms in an industry. a∙Calculate this industry's four-firm concentration ratio. b∙Is this industry competitive? c∙What market type does it most likely represent?

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

In the long run, a firm in monopolistic competition a markup of price over marginal cost and a firm in perfect competition a markup of price over marginal cost.

In the long run, a firm in monopolistic competition excess capacity and a firm in perfect competition excess capacity.