Question 1

In monopolistic competition, barriers to entry give the firms the power to set their price.

Accepted Answer

A) True 
 B)False

Question 2

The figure shows the demand curve for Gap jackets (D), and Gap's marginal revenue curve (MR), marginal cost curve (MC), and average total cost curve (ATC).
-In the figure above, Gap maximizes its profit if it sells ________ jackets per day.

Accepted Answer

A)  100 
B)  64 
C)  129 
D)  133 
A)  100 
B)  64 
C)  129 
D)  133

Question 3

The figure shows the demand curve for Gap jackets (D), and Gap's marginal revenue curve (MR), marginal cost curve (MC), and average total cost curve (ATC).
-In the figure above, the market for jackets ________ in long-run equilibrium, and there is ________ for new firms to enter.

Accepted Answer

A)  is; no incentive 
B)  is; an incentive 
C)  is not; an incentive 
D)  is not; no incentive 
A)  is; no incentive 
B)  is; an incentive 
C)  is not; an incentive 
D)  is not; no incentive

Question 4

The decision to undertake product development in monopolistic competition is made by comparing the

Accepted Answer

A)  marginal benefit of product development to the marginal cost of product development. 
B)  average revenue of product development to the average total cost of product development. 
C)  total revenue of product development to the total cost of product development. 
D)  firm's expenditure on product development to expenditures by competing firms. 
A)  marginal benefit of product development to the marginal cost of product development. 
B)  average revenue of product development to the average total cost of product development. 
C)  total revenue of product development to the total cost of product development. 
D)  firm's expenditure on product development to expenditures by competing firms.

Question 5

At a monopolistically competitive firm's current level of product development, marginal revenue of product development is greater than its marginal cost. The firm will ________.

Accepted Answer

A)  sell only new products 
B)  increase product development only if the consumer benefits 
C)  decrease product development 
D)  increase product development 
A)  sell only new products 
B)  increase product development only if the consumer benefits 
C)  decrease product development 
D)  increase product development

Question 6

-The firm in the figure above is in monopolistic competition. The firm has

Accepted Answer

A)  no excess capacity. 
B)  excess capacity of 10 units. 
C)  excess capacity of 20 units. 
D)  excess capacity of 30 units. 
A)  no excess capacity. 
B)  excess capacity of 10 units. 
C)  excess capacity of 20 units. 
D)  excess capacity of 30 units.

Question 7

When comparing perfect competition and monopolistic competition, we find that

Accepted Answer

A)  firms in monopolistic competition produce identical products just as do firms in perfect competition. 
B)  firms in monopolistic competition face barriers to entry, unlike firms in perfect competition. 
C)  advertising plays a large role in monopolistic competition, unlike in perfect competition. 
D)  firms in monopolistic competition are price takers just as is the case for firms in perfect competition. 
A)  firms in monopolistic competition produce identical products just as do firms in perfect competition. 
B)  firms in monopolistic competition face barriers to entry, unlike firms in perfect competition. 
C)  advertising plays a large role in monopolistic competition, unlike in perfect competition. 
D)  firms in monopolistic competition are price takers just as is the case for firms in perfect competition.

Question 8

-The above figure shows a firm in monopolistic competition. What price will the firm charge?

Accepted Answer

A)  $12 
B)  $24 
C)  $36 
D)  None of the above answers is correct. 
A)  $12 
B)  $24 
C)  $36 
D)  None of the above answers is correct.

Question 9

A monopolistically competitive firm has ________ power to set the price of its product because ________.

Accepted Answer

A)  no; there are no barriers to entry 
B)  some; there are barriers to entry 
C)  no; of product differentiation 
D)  some; of product differentiation 
A)  no; there are no barriers to entry 
B)  some; there are barriers to entry 
C)  no; of product differentiation 
D)  some; of product differentiation

Question 10

In monopolistically competitive industries

Accepted Answer

A)  non-price competition through product differentiation is actively pursued by firms. 
B)  product variety is the same as in perfectly competitive industries. 
C)  firms do not respond to changes in consumer demand. 
D)  firms' economic profits are protected by barriers to entry. 
A)  non-price competition through product differentiation is actively pursued by firms. 
B)  product variety is the same as in perfectly competitive industries. 
C)  firms do not respond to changes in consumer demand. 
D)  firms' economic profits are protected by barriers to entry.

Question 11

Lee, J Brand, Joe's Jeans, Paper Denim & Cloth, Levi's, Wrangler, and many others are all producers of jeans. J Brand jeans sell for about $200 a pair. What would happen if J Brand priced their jeans at $220 per pair?

Accepted Answer

A)  They would sell fewer jeans because demand is elastic. 
B)  They would not sell any jeans. 
C)  They would sell more jeans. 
D)  They would sell fewer jeans because demand is perfectly elastic. 
A)  They would sell fewer jeans because demand is elastic. 
B)  They would not sell any jeans. 
C)  They would sell more jeans. 
D)  They would sell fewer jeans because demand is perfectly elastic.

Question 12

A monopolistically competitive firm in the long run ________.

Accepted Answer

A)  is inefficient because it makes zero economic profit 
B)  produces a profit-maximizing amount of output that is less than capacity output 
C)  is efficient because it makes zero economic profit 
D)  sets its price equal to its marginal cost 
A)  is inefficient because it makes zero economic profit 
B)  produces a profit-maximizing amount of output that is less than capacity output 
C)  is efficient because it makes zero economic profit 
D)  sets its price equal to its marginal cost

Question 13

The figure shows the demand curve for Nike shoes (D), and Nike's marginal revenue curve (MR), marginal cost curve (MC), and average total cost curve (ATC).
-In the figure above, Nike maximizes its profit if it sells ________ pairs of shoes per day.

Accepted Answer

A)  120 
B)  87 
C)  137 
D)  150 
A)  120 
B)  87 
C)  137 
D)  150

Question 14

Why would a firm in a monopolistically competitive industry ever advertise?

Accepted Answer

Similar to virtually every other busines

Question 15

In monopolistic competition, free entry and free exit mean that in the long run firms in the industry make zero economic profit.

Accepted Answer

A) True 
 B)False

Question 16

In the long-run equilibrium, a firm's price definitely equals its average total cost in

Accepted Answer

A)  both monopoly and monopolistic competition. 
B)  neither monopoly nor monopolistic competition. 
C)  monopoly but not monopolistic competition. 
D)  monopolistic competition but not monopoly. 
A)  both monopoly and monopolistic competition. 
B)  neither monopoly nor monopolistic competition. 
C)  monopoly but not monopolistic competition. 
D)  monopolistic competition but not monopoly.

Question 17

Agave, Six Feet Under, Globe, Silk, Sotto Sotto and Zocalo are all restaurants in Atlanta. In the long run, Globe could I. make a positive economic profit.
II) make zero economic profit.
III) incur an economic loss.

Accepted Answer

A)  Only I 
B)  Only II 
C)  I, II, and III 
D)  Only I and II 
A)  Only I 
B)  Only II 
C)  I, II, and III 
D)  Only I and II

Question 18

A textbook publisher is in monopolistic competition. The firm can sell no books at $100 a book, but for each $10 cut in price, the quantity of books it can sell increases by 20 books a day. The firm's average variable cost and marginal cost is a constant $20 per book. What is the firm's markup?

Accepted Answer

A)  zero 
B)  $20 
C)  $40 
D)  $60 
A)  zero 
B)  $20 
C)  $40 
D)  $60

Question 19

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. Shower Power's managers are considering some quality improvements in their shower radios, which would raise the firm's total fixed cost by $200 per day and double its marginal cost. Shower Power's economists report that if the firm undertakes these quality improvements, from the demand relationship given above Shower Power will be able to increase the quantity of radios sold by 20 percent at each price.
a) Draw the new demand curve faced by the firm and its new marginal revenue curve. Draw Shower Power's new marginal cost and new average total cost curves.
b) With no quality improvements, what quantity of radios maximizes Shower Power's profit? What is the profit-maximizing price? What is the firm's economic profit?
c) If Shower Power undertakes the quality improvements, what quantity of radios should it sell to maximize its profit? What is the profit-maximizing price? What is its economic profit?
d) Should Shower Power implement the quality improvements? Why or why not?

Accepted Answer

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

Question 20

Which of the following firms are in a monopolistically competitive market?

Accepted Answer

A)  the many retail firms such as JCPenney, Sears, The Gap, and so on 
B)  the sole local providers of electricity, such as Kansas Power and Light, or Pacific Gas and Electric 
C)  the many farmers that grow wheat 
D)  None of the above are in a monopolistically competitive market. 
A)  the many retail firms such as JCPenney, Sears, The Gap, and so on 
B)  the sole local providers of electricity, such as Kansas Power and Light, or Pacific Gas and Electric 
C)  the many farmers that grow wheat 
D)  None of the above are in a monopolistically competitive market.

In monopolistic competition, barriers to entry give the firms the power to set their price.

The figure shows the demand curve for Gap jackets (D), and Gap's marginal revenue curve (MR), marginal cost curve (MC), and average total cost curve (ATC). -In the figure above, Gap maximizes its profit if it sells ________ jackets per day.

The figure shows the demand curve for Gap jackets (D), and Gap's marginal revenue curve (MR), marginal cost curve (MC), and average total cost curve (ATC). -In the figure above, the market for jackets in long-run equilibrium, and there is for new firms to enter.

The decision to undertake product development in monopolistic competition is made by comparing the

At a monopolistically competitive firm's current level of product development, marginal revenue of product development is greater than its marginal cost. The firm will ________.

-The firm in the figure above is in monopolistic competition. The firm has

When comparing perfect competition and monopolistic competition, we find that

-The above figure shows a firm in monopolistic competition. What price will the firm charge?

A monopolistically competitive firm has power to set the price of its product because .

In monopolistically competitive industries

Lee, J Brand, Joe's Jeans, Paper Denim & Cloth, Levi's, Wrangler, and many others are all producers of jeans. J Brand jeans sell for about $200 a pair. What would happen if J Brand priced their jeans at $220 per pair?

A monopolistically competitive firm in the long run ________.

The figure shows the demand curve for Nike shoes (D), and Nike's marginal revenue curve (MR), marginal cost curve (MC), and average total cost curve (ATC). -In the figure above, Nike maximizes its profit if it sells ________ pairs of shoes per day.

Why would a firm in a monopolistically competitive industry ever advertise?

In monopolistic competition, free entry and free exit mean that in the long run firms in the industry make zero economic profit.

In the long-run equilibrium, a firm's price definitely equals its average total cost in

Agave, Six Feet Under, Globe, Silk, Sotto Sotto and Zocalo are all restaurants in Atlanta. In the long run, Globe could I. make a positive economic profit. II) make zero economic profit. III) incur an economic loss.

A textbook publisher is in monopolistic competition. The firm can sell no books at $100 a book, but for each $10 cut in price, the quantity of books it can sell increases by 20 books a day. The firm's average variable cost and marginal cost is a constant $20 per book. What is the firm's markup?

Which of the following firms are in a monopolistically competitive market?

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

Exam 14: Monopolistic Competition

In monopolistic competition, barriers to entry give the firms the power to set their price.

The figure shows the demand curve for Gap jackets (D), and Gap's marginal revenue curve (MR), marginal cost curve (MC), and average total cost curve (ATC). -In the figure above, Gap maximizes its profit if it sells ________ jackets per day.

The figure shows the demand curve for Gap jackets (D), and Gap's marginal revenue curve (MR), marginal cost curve (MC), and average total cost curve (ATC). -In the figure above, the market for jackets ________ in long-run equilibrium, and there is ________ for new firms to enter.

The decision to undertake product development in monopolistic competition is made by comparing the

At a monopolistically competitive firm's current level of product development, marginal revenue of product development is greater than its marginal cost. The firm will ________.

-The firm in the figure above is in monopolistic competition. The firm has

When comparing perfect competition and monopolistic competition, we find that

-The above figure shows a firm in monopolistic competition. What price will the firm charge?

A monopolistically competitive firm has ________ power to set the price of its product because ________.

In monopolistically competitive industries

Lee, J Brand, Joe's Jeans, Paper Denim & Cloth, Levi's, Wrangler, and many others are all producers of jeans. J Brand jeans sell for about $200 a pair. What would happen if J Brand priced their jeans at $220 per pair?

A monopolistically competitive firm in the long run ________.

The figure shows the demand curve for Nike shoes (D), and Nike's marginal revenue curve (MR), marginal cost curve (MC), and average total cost curve (ATC). -In the figure above, Nike maximizes its profit if it sells ________ pairs of shoes per day.

Why would a firm in a monopolistically competitive industry ever advertise?

In monopolistic competition, free entry and free exit mean that in the long run firms in the industry make zero economic profit.

In the long-run equilibrium, a firm's price definitely equals its average total cost in

Agave, Six Feet Under, Globe, Silk, Sotto Sotto and Zocalo are all restaurants in Atlanta. In the long run, Globe could I. make a positive economic profit. II) make zero economic profit. III) incur an economic loss.

A textbook publisher is in monopolistic competition. The firm can sell no books at $100 a book, but for each $10 cut in price, the quantity of books it can sell increases by 20 books a day. The firm's average variable cost and marginal cost is a constant $20 per book. What is the firm's markup?

Which of the following firms are in a monopolistically competitive market?

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

The figure shows the demand curve for Gap jackets (D), and Gap's marginal revenue curve (MR), marginal cost curve (MC), and average total cost curve (ATC). -In the figure above, the market for jackets in long-run equilibrium, and there is for new firms to enter.

A monopolistically competitive firm has power to set the price of its product because .