Question 1

If an industry lacks barriers to entry and each of the many firm faces a demand curve with a negative slope, the industry is

Accepted Answer

A)  perfectly competitive. 
B)  monopolistically competitive. 
C)  an oligopoly. 
D)  a monopoly. 
A)  perfectly competitive. 
B)  monopolistically competitive. 
C)  an oligopoly. 
D)  a monopoly.

Question 2

In the long run, in monopolistic competition

Accepted Answer

A)  a firm's price equals its marginal cost. 
B)  firms make an economic profit. 
C)  firms make zero economic profit. 
D)  Both answers A and C are correct. 
A)  a firm's price equals its marginal cost. 
B)  firms make an economic profit. 
C)  firms make zero economic profit. 
D)  Both answers A and C are correct.

Question 3

In monopolistic competition

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. 
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.

Question 4

Which of the following is FALSE regarding the long run for a firm in monopolistic competition?

Accepted Answer

A)  The firm's economic profit equals zero. 
B)  Marginal cost equals average total cost. 
C)  Price exceeds marginal cost. 
D)  Price equals average total cost. 
A)  The firm's economic profit equals zero. 
B)  Marginal cost equals average total cost. 
C)  Price exceeds marginal cost. 
D)  Price equals average total cost.

Question 5

-Fresh Taste, Inc. produces organic breakfast cereals. The market for breakfast cereals is monopolistically competitive. The figure above shows the demand curve that Fresh Taste faces (D), the company's marginal revenue curve (MR), its marginal cost curve (MC), and its average total cost curve (ATC). Fresh Taste's excess capacity is

Accepted Answer

A)  12,000 boxes per day. 
B)  4,000 boxes per day. 
C)  8,000 boxes per day. 
D)  zero. 
A)  12,000 boxes per day. 
B)  4,000 boxes per day. 
C)  8,000 boxes per day. 
D)  zero.

Question 6

-In the figure above, assuming that the firm does not shut down, the firm will produce

Accepted Answer

A)  fewer than 19 units. 
B)  20 units. 
C)  30 units. 
D)  40 units. 
A)  fewer than 19 units. 
B)  20 units. 
C)  30 units. 
D)  40 units.

Question 7

-The figure above shows the cost, marginal revenue, and demand curves of Golden Chow, a producer of dog food. The market for dog food is monopolistic competition. In the short run, Golden Chow sells 400 cans of dog food per day and makes ________. Other firms have ________ incentive to enter the industry.

Accepted Answer

A)  an economic profit of $200 a day; an 
B)  an economic profit of $400 a day; an 
C)  a normal profit of $200 a day; no 
D)  an economic profit of $400 a day; no 
A)  an economic profit of $200 a day; an 
B)  an economic profit of $400 a day; an 
C)  a normal profit of $200 a day; no 
D)  an economic profit of $400 a day; no

Question 8

A monopolistically competitive firm will always choose to produce where

Accepted Answer

A)  marginal revenue equals marginal cost. 
B)  marginal cost meets the demand curve. 
C)  average total cost meets the demand curve. 
D)  average total cost is minimized. 
A)  marginal revenue equals marginal cost. 
B)  marginal cost meets the demand curve. 
C)  average total cost meets the demand curve. 
D)  average total cost is minimized.

Question 9

In the long run, firms in monopolistic competition produce at a level that is ________ the efficient scale of output.

Accepted Answer

A)  less than 
B)  equal to 
C)  more than 
D)  All of the above are possible depending on market conditions. 
A)  less than 
B)  equal to 
C)  more than 
D)  All of the above are possible depending on market conditions.

Question 10

For a firm in monopolistic competition, the marginal cost curve intersects the average total cost curve

Accepted Answer

A)  at the minimum average total cost. 
B)  to the left of the minimum average total cost. 
C)  to the right of the minimum average total cost. 
D)  at no point. 
A)  at the minimum average total cost. 
B)  to the left of the minimum average total cost. 
C)  to the right of the minimum average total cost. 
D)  at no point.

Question 11

Shower Power, Inc., a firm in monopolistic competition, produces shower radios. The company's economists know that it can sell no radios at $80, and for each $10 cut in price, the quantity of radios it can sell increases by 50 a day. This relationship continues to hold until the price falls to $20. The firm's total fixed cost is $3,000 a day. Its marginal cost is constant at $20 per radio.
a) Draw the demand curve faced by the firm and its marginal revenue curve. Also draw Shower Power's marginal cost and average total cost curves.
b) What quantity of radios should Shower Power produce to maximize its profit? What price should it charge?
c) What is the firm's short-run economic profit or loss?
d) In the long run, what will happen to the demand for Shower Power's radios, the quantity of radios sold, the price charged, and the firm's economic profit?'

Accepted Answer

@#IMG-DLM& a) The figure above shows Shower Power'

Question 12

How do the characteristics of perfect competition and monopolistic competition differ?

Accepted Answer

In monopolistic competition, the product

Question 13

What type of profit can a firm in monopolistic competition make in the long run? Explain your answer.

Accepted Answer

In the long run, a firm in monopolistic

Question 14

The Karaoke Channel Online streams professional-grade karaoke for $9.95 a month. Suppose Karaoke Channel Online has a constant marginal cost of $1 per customer and total fixed cost is $20,000. The profit maximizing number of customers is 10,000. Several competitors start to advertise online. Karaoke Channel Online now spends $5,000 a month on advertising and the profit maximizing number of customers increases to 12,000. What is Karaoke Channel Online's average total cost after the advertising begins?

Accepted Answer

A)  $3.08 
B)  $3 
C)  $2.08 
D)  $2.50 
A)  $3.08 
B)  $3 
C)  $2.08 
D)  $2.50

Question 15

A product that is a close substitute but not a perfect substitute for the products of the other firms is called

Accepted Answer

A)  a homogeneous product. 
B)  an efficient product. 
C)  a differentiated product. 
D)  an inelastic product. 
A)  a homogeneous product. 
B)  an efficient product. 
C)  a differentiated product. 
D)  an inelastic product.

Question 16

Monopolistic competition is a market structure in which

Accepted Answer

A)  a small number of firms compete. 
B)  each firm produces an identical product. 
C)  firms only compete on product price. 
D)  firms are free to enter or exit. 
A)  a small number of firms compete. 
B)  each firm produces an identical product. 
C)  firms only compete on product price. 
D)  firms are free to enter or exit.

Question 17

Firms in monopolistic competition can achieve product differentiation by

Accepted Answer

A)  expanding plant size. 
B)  exploiting economies of scale in production. 
C)  advertising special characteristics. 
D)  setting the price equal to average revenue. 
A)  expanding plant size. 
B)  exploiting economies of scale in production. 
C)  advertising special characteristics. 
D)  setting the price equal to average revenue.

Question 18

Monopolistically competitive firms constantly develop new products in an effort to

Accepted Answer

A)  make the demand for their product more elastic. 
B)  increase the demand for their product. 
C)  increase the marginal cost of their product. 
D)  None of the above are correct. 
A)  make the demand for their product more elastic. 
B)  increase the demand for their product. 
C)  increase the marginal cost of their product. 
D)  None of the above are correct.

Question 19

An increase in advertising costs affect a firm in a monopolistic competition by increasing the firm's

Accepted Answer

A)  total fixed cost. 
B)  marginal cost. 
C)  total variable cost. 
D)  average variable cost. 
A)  total fixed cost. 
B)  marginal cost. 
C)  total variable cost. 
D)  average variable cost.

Question 20

The loss of efficiency that occurs in monopolistic competition has to be weighed against the gain of

Accepted Answer

A)  higher wages for employees. 
B)  an increase in employment. 
C)  greater product variety. 
D)  reduced environmental damage. 
A)  higher wages for employees. 
B)  an increase in employment. 
C)  greater product variety. 
D)  reduced environmental damage.

If an industry lacks barriers to entry and each of the many firm faces a demand curve with a negative slope, the industry is

In the long run, in monopolistic competition

In monopolistic competition

Which of the following is FALSE regarding the long run for a firm in monopolistic competition?

-In the figure above, assuming that the firm does not shut down, the firm will produce

-The figure above shows the cost, marginal revenue, and demand curves of Golden Chow, a producer of dog food. The market for dog food is monopolistic competition. In the short run, Golden Chow sells 400 cans of dog food per day and makes . Other firms have incentive to enter the industry.

A monopolistically competitive firm will always choose to produce where

In the long run, firms in monopolistic competition produce at a level that is ________ the efficient scale of output.

For a firm in monopolistic competition, the marginal cost curve intersects the average total cost curve

How do the characteristics of perfect competition and monopolistic competition differ?

What type of profit can a firm in monopolistic competition make in the long run? Explain your answer.

A product that is a close substitute but not a perfect substitute for the products of the other firms is called

Monopolistic competition is a market structure in which

Firms in monopolistic competition can achieve product differentiation by

Monopolistically competitive firms constantly develop new products in an effort to

An increase in advertising costs affect a firm in a monopolistic competition by increasing the firm's

The loss of efficiency that occurs in monopolistic competition has to be weighed against the gain of

What Is Economics

The Economic Problem

Demand and Supply

Elasticity

Efficiency and Equity

Government Actions in Markets

Global Markets in Action

Utility and Demand

Possibilities, Preferences, and Choices

Organizing Production

Output and Costs

Perfect Competition

Monopoly

Oligopoly

Public Choices, Public Goods, and Healthcare

Externalities

Markets for Factors of Production

Economic Inequality

Uncertainty and Information

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Exam 14: Monopolistic Competition

If an industry lacks barriers to entry and each of the many firm faces a demand curve with a negative slope, the industry is

In the long run, in monopolistic competition

In monopolistic competition

Which of the following is FALSE regarding the long run for a firm in monopolistic competition?

-In the figure above, assuming that the firm does not shut down, the firm will produce

A monopolistically competitive firm will always choose to produce where

In the long run, firms in monopolistic competition produce at a level that is ________ the efficient scale of output.

For a firm in monopolistic competition, the marginal cost curve intersects the average total cost curve

How do the characteristics of perfect competition and monopolistic competition differ?

What type of profit can a firm in monopolistic competition make in the long run? Explain your answer.

A product that is a close substitute but not a perfect substitute for the products of the other firms is called

Monopolistic competition is a market structure in which

Firms in monopolistic competition can achieve product differentiation by

Monopolistically competitive firms constantly develop new products in an effort to

An increase in advertising costs affect a firm in a monopolistic competition by increasing the firm's

The loss of efficiency that occurs in monopolistic competition has to be weighed against the gain of

What Is Economics

The Economic Problem

Demand and Supply

Elasticity

Efficiency and Equity

Government Actions in Markets

Global Markets in Action

Utility and Demand

Possibilities, Preferences, and Choices

Organizing Production

Output and Costs

Perfect Competition

Monopoly

Oligopoly

Public Choices, Public Goods, and Healthcare

Externalities

Markets for Factors of Production

Economic Inequality

Uncertainty and Information

Filters