Question 1

A major difference between monopolistic competition and perfect competition is

Accepted Answer

A)  the number of sellers in the markets. 
B)  the degree by which the market demand curves slope downwards. 
C)  that products are not standardized in monopolistic competition unlike in perfect competition. 
D)  the barriers to entry in the two markets. 
A)  the number of sellers in the markets. 
B)  the degree by which the market demand curves slope downwards. 
C)  that products are not standardized in monopolistic competition unlike in perfect competition. 
D)  the barriers to entry in the two markets.

Question 2

When a monopolistically competitive firm cuts its price to increase its sales,it experiences a loss in revenue due to the income effect and a gain in revenue due to the substitution effect.

Accepted Answer

A) True 
 B)False

Question 3

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 4

Which of the following is the best example of a firm that competes in a monopolistically competitive market?

Accepted Answer

A)  the U.S. Postal Service 
B)  Microsoft 
C)  a movie theater 
D)  an automobile manufacturer 
A)  the U.S. Postal Service 
B)  Microsoft 
C)  a movie theater 
D)  an automobile manufacturer

Question 5

Because of the flaws of the concentration ratio as a measure of the extent of competition in an industry,some economists prefer another measure of competition,the Herfindahl-Hirschman Index.

Accepted Answer

A) True 
 B)False

Question 6

If a monopolistically competitive firm breaks even,the firm

Accepted Answer

A)  is earning an accounting profit and will have to pay taxes on that profit. 
B)  is earning zero accounting and zero economic profit. 
C)  should advertise its product to stimulate demand. 
D)  should expand production. 
A)  is earning an accounting profit and will have to pay taxes on that profit. 
B)  is earning zero accounting and zero economic profit. 
C)  should advertise its product to stimulate demand. 
D)  should expand production.

Question 7

New firms are able to enter monopolistically competitive markets because there are low barriers to entry.

Accepted Answer

A) True 
 B)False

Question 8

One way by which firms differentiate their products is to try to anticipate changes in consumer tastes and adapt their products to fit those changed tastes.

Accepted Answer

A) True 
 B)False

Question 9

Suppose that if a local McDonald's restaurant reduces the price of a Big Mac from $4.00 to $3.25,the number of Big Macs it sells per day will increase from 4 to 5.Explain the output effect and the price effect resulting from this change.Using a graph,illustrate both the loss in revenue from selling each of the first 4 Big Macs for $0.75 less and the additional revenue from selling 1 more Big Mac.What is the total change in revenue received which results from this price decrease?

Accepted Answer

The 1 extra Big Mac sold is the output e

Question 10

How does the long-run equilibrium of a monopolistically competitive industry differ from that of a perfectly competitive industry?

Accepted Answer

A)  A firm in monopolistic competition will earn economic profits but a firm in perfect competition earns zero profit. 
B)  A firm in monopolistic competition will charge a price higher than the average cost of production but a firm in perfect competition charges a price equal to the average cost of production. 
C)  A firm in monopolistic competition does not take full advantage of its economies of scale but a firm in perfect competition produces at the lowest average cost possible. 
D)  A firm in monopolistic competition produces an allocatively efficient output level while a firm in perfect competition produces a productively efficient output level. 
A)  A firm in monopolistic competition will earn economic profits but a firm in perfect competition earns zero profit. 
B)  A firm in monopolistic competition will charge a price higher than the average cost of production but a firm in perfect competition charges a price equal to the average cost of production. 
C)  A firm in monopolistic competition does not take full advantage of its economies of scale but a firm in perfect competition produces at the lowest average cost possible. 
D)  A firm in monopolistic competition produces an allocatively efficient output level while a firm in perfect competition produces a productively efficient output level.

A major difference between monopolistic competition and perfect competition is

When a monopolistically competitive firm cuts its price to increase its sales,it experiences a loss in revenue due to the income effect and a gain in revenue due to the substitution effect.

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

Which of the following is the best example of a firm that competes in a monopolistically competitive market?

Because of the flaws of the concentration ratio as a measure of the extent of competition in an industry,some economists prefer another measure of competition,the Herfindahl-Hirschman Index.

If a monopolistically competitive firm breaks even,the firm

New firms are able to enter monopolistically competitive markets because there are low barriers to entry.

One way by which firms differentiate their products is to try to anticipate changes in consumer tastes and adapt their products to fit those changed tastes.

How does the long-run equilibrium of a monopolistically competitive industry differ from that of a perfectly competitive industry?

Economics: Foundations and Models

Trade-Offs, Comparative Advantage, and the Market System

Where Prices Come From: The Interaction of Demand and Supply

Market Efficiency and Market Failure

The Economics of Health Care

Firms, The Stock Market, and Corporate Governance

Consumer Choice and Elasticity

Technology,Production,and Costs

Firms in Perfectly Competitive Markets

Monopoly and Antitrust Policy

GDP: Measuring Total Production and Income

Unemployment and Inflation

Economic Growth, The Financial System, and Business Cycles

Aggregate Demand and Aggregate Supply Analysis

Money,Banks,and the Federal Reserve System

Monetary Policy

Fiscal Policy

Comparative Advantage, International Trade, and Exchange Rates

Filters

Exam 11: Monopolistic Competition and Oligopoly

A major difference between monopolistic competition and perfect competition is

When a monopolistically competitive firm cuts its price to increase its sales,it experiences a loss in revenue due to the income effect and a gain in revenue due to the substitution effect.

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

Which of the following is the best example of a firm that competes in a monopolistically competitive market?

Because of the flaws of the concentration ratio as a measure of the extent of competition in an industry,some economists prefer another measure of competition,the Herfindahl-Hirschman Index.

If a monopolistically competitive firm breaks even,the firm

New firms are able to enter monopolistically competitive markets because there are low barriers to entry.

One way by which firms differentiate their products is to try to anticipate changes in consumer tastes and adapt their products to fit those changed tastes.

How does the long-run equilibrium of a monopolistically competitive industry differ from that of a perfectly competitive industry?

Economics: Foundations and Models

Trade-Offs, Comparative Advantage, and the Market System

Where Prices Come From: The Interaction of Demand and Supply

Market Efficiency and Market Failure

The Economics of Health Care

Firms, The Stock Market, and Corporate Governance

Consumer Choice and Elasticity

Technology,Production,and Costs

Firms in Perfectly Competitive Markets

Monopoly and Antitrust Policy

GDP: Measuring Total Production and Income

Unemployment and Inflation

Economic Growth, The Financial System, and Business Cycles

Aggregate Demand and Aggregate Supply Analysis

Money,Banks,and the Federal Reserve System

Monetary Policy

Fiscal Policy

Comparative Advantage, International Trade, and Exchange Rates

Filters