Question 1

One benefit of monopolistic competition over perfect competition is

Accepted Answer

A)  economic profit. 
B)  product variety. 
C)  excess capacity. 
D)  efficiency. 
A)  economic profit. 
B)  product variety. 
C)  excess capacity. 
D)  efficiency.

Question 2

If firms in a monopolistically competitive industry are making an economic profit, then definitely there is

Accepted Answer

A)  a leftward shift in each firm's demand curve as new firms enter the market. 
B)  a rightward shift in each firm's marginal revenue curve as new firms enter the market. 
C)  an upward shift in each firm's cost curves as new firms enter the market. 
D)  All of the above answers are correct. 
A)  a leftward shift in each firm's demand curve as new firms enter the market. 
B)  a rightward shift in each firm's marginal revenue curve as new firms enter the market. 
C)  an upward shift in each firm's cost curves as new firms enter the market. 
D)  All of the above answers are correct.

Question 3

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 charges ________ per pair of shoes.

Accepted Answer

A)  $75 
B)  $60 
C)  $72 
D)  $42 
A)  $75 
B)  $60 
C)  $72 
D)  $42

Question 4

The key feature of monopolistic competition that distinguishes it from perfect competition is

Accepted Answer

A)  many sellers. 
B)  barriers to entry. 
C)  interdependency. 
D)  product differentiation. 
A)  many sellers. 
B)  barriers to entry. 
C)  interdependency. 
D)  product differentiation.

Question 5

In a monopolistically competitive industry

Accepted Answer

A)  firms can make an economic profit in the long run because of barriers to entry. 
B)  the firms can never make an economic profit. 
C)  if firms are making an economic profit, new firms enter the industry. 
D)  firms can make an economic profit in the long run because of product differentiation. 
A)  firms can make an economic profit in the long run because of barriers to entry. 
B)  the firms can never make an economic profit. 
C)  if firms are making an economic profit, new firms enter the industry. 
D)  firms can make an economic profit in the long run because of product differentiation.

Question 6

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 $200 a pair. Suppose at the profit maximizing quantity, J Brand's ATC was $220 and AVC was $110, which statement is TRUE?

Accepted Answer

A)  J Brand will shut down in the short run and go out of business in the long run. 
B)  J Brand will produce in the short run but go out of business in the long run. 
C)  J Brand will produce in the short run and shut down in the long run. 
D)  J Brand will produce in the short and long run. 
A)  J Brand will shut down in the short run and go out of business in the long run. 
B)  J Brand will produce in the short run but go out of business in the long run. 
C)  J Brand will produce in the short run and shut down in the long run. 
D)  J Brand will produce in the short and long run.

Question 7

The figure above could represent the long-run equilibrium for a

Accepted Answer

A)  perfectly competitive firm. 
B)  monopolistically competitive firm. 
C)  monopoly. 
D)  firm facing inelastic demand at all outputs. 
A)  perfectly competitive firm. 
B)  monopolistically competitive firm. 
C)  monopoly. 
D)  firm facing inelastic demand at all outputs.

Question 8

In the short run, a monopolistically competitive firm chooses

Accepted Answer

A)  both its price and its quantity. 
B)  its price but not its quantity. 
C)  its quantity but not its price. 
D)  neither its price nor its quantity. 
A)  both its price and its quantity. 
B)  its price but not its quantity. 
C)  its quantity but not its price. 
D)  neither its price nor its quantity.

Question 9

Consider a monopolistically competitive industry which is in long-run equilibrium. Which of the following is TRUE?

Accepted Answer

A)  All firms charge a price equal to average total cost. 
B)  All firms charge a price equal to marginal cost. 
C)  All firms earn positive economic profit. 
D)  Demand, average total cost, and marginal cost all intersect. 
A)  All firms charge a price equal to average total cost. 
B)  All firms charge a price equal to marginal cost. 
C)  All firms earn positive economic profit. 
D)  Demand, average total cost, and marginal cost all intersect.

Question 10

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 total fixed cost is $2,400 a day. Its average variable cost and marginal cost is a constant $20 per book. What is the firm's maximum economic profit?

Accepted Answer

A)  zero 
B)  $800 
C)  -$400 
D)  $1,000 
A)  zero 
B)  $800 
C)  -$400 
D)  $1,000

Question 11

In monopolistic competition, a firm must determine what price to set for its good because

Accepted Answer

A)  the demand for its good is not perfectly elastic. 
B)  the demand for its good is perfectly elastic. 
C)  there are many buyers. 
D)  there are many sellers. 
A)  the demand for its good is not perfectly elastic. 
B)  the demand for its good is perfectly elastic. 
C)  there are many buyers. 
D)  there are many sellers.

Question 12

Advertising costs are ________ costs and the per unit cost of advertising ________ as production increases.

Accepted Answer

A)  fixed; increases 
B)  variable; increases 
C)  fixed; decreases 
D)  variable; does not change 
A)  fixed; increases 
B)  variable; increases 
C)  fixed; decreases 
D)  variable; does not change

Question 13

-The above figure shows a firm in monopolistic competition. At the profit maximizing level of output

Accepted Answer

A)  the firm is making a positive economic profit. 
B)  the firm incurs an economic loss. 
C)  the firm is making zero economic profit. 
D)  this firm would choose to shut down in the short run. 
A)  the firm is making a positive economic profit. 
B)  the firm incurs an economic loss. 
C)  the firm is making zero economic profit. 
D)  this firm would choose to shut down in the short run.

Question 14

A firm in monopolistic competition has some degree of price-setting power because

Accepted Answer

A)  in the long run it earns a normal profit. 
B)  it can never earn less than normal profit. 
C)  the price it charges is never more than its marginal cost. 
D)  if it raises its price, the quantity it can sell will not decrease to zero. 
A)  in the long run it earns a normal profit. 
B)  it can never earn less than normal profit. 
C)  the price it charges is never more than its marginal cost. 
D)  if it raises its price, the quantity it can sell will not decrease to zero.

Question 15

In the long run, a firm in a monopolistically competitive industry has its price equal to its

Accepted Answer

A)  average total cost. 
B)  marginal cost. 
C)  marginal revenue. 
D)  elasticity of demand. 
A)  average total cost. 
B)  marginal cost. 
C)  marginal revenue. 
D)  elasticity of demand.

Question 16

Expenditures on advertising ________.

Accepted Answer

A)  can lower average total cost if the advertising increases the quantity sold by a large enough amount 
B)  cannot lower average total cost because when a firm advertises it increases its costs 
C)  always lower average total cost because whenever a firm advertises, it increases the quantity sold 
D)  are variable costs so do not affect the average total cost 
A)  can lower average total cost if the advertising increases the quantity sold by a large enough amount 
B)  cannot lower average total cost because when a firm advertises it increases its costs 
C)  always lower average total cost because whenever a firm advertises, it increases the quantity sold 
D)  are variable costs so do not affect the average total cost

Question 17

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 charges ________ per jacket.

Accepted Answer

A)  $100 
B)  $95 
C)  $75 
D)  $120 
A)  $100 
B)  $95 
C)  $75 
D)  $120

Question 18

Agave, Six Feet Under, Globe, Silk, Sotto Sotto and Zocalo are all restaurants in Atlanta. In this monopolistic market, economic profit would encourage ________, which decreases the ________ for each firm's meals.

Accepted Answer

A)  entry; demand 
B)  entry; supply 
C)  exit; demand 
D)  exit; supply 
A)  entry; demand 
B)  entry; supply 
C)  exit; demand 
D)  exit; supply

Question 19

-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 long run as new firms enter, Golden Chow cuts its output to 200 cans per day. Its excess capacity is ________ cans per day.

Accepted Answer

A)  0 
B)  between 0 and 200 
C)  between 201 and 400 
D)  more than 401 
A)  0 
B)  between 0 and 200 
C)  between 201 and 400 
D)  more than 401

Question 20

Monopolistically competitive firms increasing their advertising will definitely achieve which of the following?

Accepted Answer

A)  shift their average total cost curve up 
B)  shift their demand curve to the right 
C)  increase their economic profit 
D)  shift their demand curve to the right and shift their average total cost curve up 
A)  shift their average total cost curve up 
B)  shift their demand curve to the right 
C)  increase their economic profit 
D)  shift their demand curve to the right and shift their average total cost curve up

One benefit of monopolistic competition over perfect competition is

If firms in a monopolistically competitive industry are making an economic profit, then definitely there is

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 charges ________ per pair of shoes.

The key feature of monopolistic competition that distinguishes it from perfect competition is

In a monopolistically competitive industry

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 $200 a pair. Suppose at the profit maximizing quantity, J Brand's ATC was $220 and AVC was $110, which statement is TRUE?

The figure above could represent the long-run equilibrium for a

In the short run, a monopolistically competitive firm chooses

Consider a monopolistically competitive industry which is in long-run equilibrium. Which of the following is TRUE?

In monopolistic competition, a firm must determine what price to set for its good because

Advertising costs are costs and the per unit cost of advertising as production increases.

-The above figure shows a firm in monopolistic competition. At the profit maximizing level of output

A firm in monopolistic competition has some degree of price-setting power because

In the long run, a firm in a monopolistically competitive industry has its price equal to its

Expenditures on advertising ________.

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 charges ________ per jacket.

Agave, Six Feet Under, Globe, Silk, Sotto Sotto and Zocalo are all restaurants in Atlanta. In this monopolistic market, economic profit would encourage , which decreases the for each firm's meals.

-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 long run as new firms enter, Golden Chow cuts its output to 200 cans per day. Its excess capacity is ________ cans per day.

Monopolistically competitive firms increasing their advertising will definitely achieve which of the following?

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

One benefit of monopolistic competition over perfect competition is

If firms in a monopolistically competitive industry are making an economic profit, then definitely there is

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 charges ________ per pair of shoes.

The key feature of monopolistic competition that distinguishes it from perfect competition is

In a monopolistically competitive industry

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 $200 a pair. Suppose at the profit maximizing quantity, J Brand's ATC was $220 and AVC was $110, which statement is TRUE?

The figure above could represent the long-run equilibrium for a

In the short run, a monopolistically competitive firm chooses

Consider a monopolistically competitive industry which is in long-run equilibrium. Which of the following is TRUE?

In monopolistic competition, a firm must determine what price to set for its good because

Advertising costs are ________ costs and the per unit cost of advertising ________ as production increases.

-The above figure shows a firm in monopolistic competition. At the profit maximizing level of output

A firm in monopolistic competition has some degree of price-setting power because

In the long run, a firm in a monopolistically competitive industry has its price equal to its

Expenditures on advertising ________.

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 charges ________ per jacket.

Agave, Six Feet Under, Globe, Silk, Sotto Sotto and Zocalo are all restaurants in Atlanta. In this monopolistic market, economic profit would encourage ________, which decreases the ________ for each firm's meals.

-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 long run as new firms enter, Golden Chow cuts its output to 200 cans per day. Its excess capacity is ________ cans per day.

Monopolistically competitive firms increasing their advertising will definitely achieve which of the following?

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

Advertising costs are costs and the per unit cost of advertising as production increases.

Agave, Six Feet Under, Globe, Silk, Sotto Sotto and Zocalo are all restaurants in Atlanta. In this monopolistic market, economic profit would encourage , which decreases the for each firm's meals.