Question 1

"A firm in monopolistic competition maximizes its profit by producing where its price is equal to its marginal cost." Is the previous statement correct or incorrect?

Accepted Answer

The statement is incorrect. A firm in mo

Question 2

-The figure above shows the situation facing Smart Digit, Inc., a firm in monopolistic competition that produces calculators. What quantity does the firm produce?

Accepted Answer

A)  200 calculators per day 
B)  300 calculators per day 
C)  more than 300 calculators per day and less than 400 calculators per day 
D)  400 calculators per day 
A)  200 calculators per day 
B)  300 calculators per day 
C)  more than 300 calculators per day and less than 400 calculators per day 
D)  400 calculators per day

Question 3

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

Accepted Answer

A)  some customers will exit the market. 
B)  some workers will leave the industry's labor force. 
C)  some firms will leave the industry. 
D)  new firms will enter the industry. 
A)  some customers will exit the market. 
B)  some workers will leave the industry's labor force. 
C)  some firms will leave the industry. 
D)  new firms will enter the industry.

Question 4

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)  $130 
B)  $80 
C)  $115 
D)  $100 
A)  $130 
B)  $80 
C)  $115 
D)  $100

Question 5

How is a monopolistically competitive firm similar to a perfectly competitive firm?

Accepted Answer

A)  Both will observe entry into the industry if economic profit is positive. 
B)  Both produce where average total cost equals marginal cost. 
C)  Both make a positive economic profit in the long run. 
D)  Both produce a homogeneous good. 
A)  Both will observe entry into the industry if economic profit is positive. 
B)  Both produce where average total cost equals marginal cost. 
C)  Both make a positive economic profit in the long run. 
D)  Both produce a homogeneous good.

Question 6

-The above figure shows the demand and cost curves for a monopolistically competitive firm in the long run. The maximum economic profit this firm can make equal equals

Accepted Answer

A)  $0. 
B)  $80. 
C)  $120. 
D)  $160. 
A)  $0. 
B)  $80. 
C)  $120. 
D)  $160.

Question 7

"One of the defining features of monopolistic competition is product variety." Is the previous statement correct or incorrect?

Accepted Answer

The statement is correct. In m

Question 8

A firm's markup is the amount by which ________ exceeds ________.

Accepted Answer

A)  price; average total cost 
B)  price; marginal cost 
C)  average total cost; marginal cost 
D)  price; average variable cost 
A)  price; average total cost 
B)  price; marginal cost 
C)  average total cost; marginal cost 
D)  price; average variable cost

Question 9

ACME, Inc. operates in a market structure in which there are many other firms that find it easy to enter or exit. ACME is operating in ________ market.

Accepted Answer

A)  definitely a perfectly competitive 
B)  either a perfectly competitive or a monopolistically competitive 
C)  definitely a monopolistically competitive 
D)  neither a perfectly competitive nor a monopolistically competitive 
A)  definitely a perfectly competitive 
B)  either a perfectly competitive or a monopolistically competitive 
C)  definitely a monopolistically competitive 
D)  neither a perfectly competitive nor a monopolistically competitive

Question 10

Explain the role of advertising in monopolistic competition. Describe how advertising by all firms in a monopolistically competitive industry impacts a firm's ATC curve, its MC curve, its demand curve, and its MR curve.

Accepted Answer

In order to maintain (or regain) economi

Question 11

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's economic profit is ________.

Accepted Answer

A)  $3,000 
B)  $1,800 
C)  $9,000 
D)  zero 
A)  $3,000 
B)  $1,800 
C)  $9,000 
D)  zero

Question 12

Small pizza parlors exist in just about every town. Anyone can open a pizza parlor, and the pizzas from one parlor typically have different tastes and sizes than pizzas from another parlor. Thus, the pizza industry is an example of

Accepted Answer

A)  perfect competition. 
B)  monopoly. 
C)  oligopoly. 
D)  monopolistic competition. 
A)  perfect competition. 
B)  monopoly. 
C)  oligopoly. 
D)  monopolistic competition.

Question 13

In monopolistic competition

Accepted Answer

A)  each firm's price cannot deviate from the average price of other firms. 
B)  each firm supplies a large part of the total industry output. 
C)  no one firm's actions directly affect the actions of the other firms. 
D)  firms set their prices based on agreements with their competitors. 
A)  each firm's price cannot deviate from the average price of other firms. 
B)  each firm supplies a large part of the total industry output. 
C)  no one firm's actions directly affect the actions of the other firms. 
D)  firms set their prices based on agreements with their competitors.

Question 14

-The above figure represents a restaurant operating in monopolistic competition.
a) What is the profit-maximizing level of output?
b) What price will the firm charge?
c) What is the firm's economic profit (or loss)?
d) Is this a long-run equilibrium? Why or why not?
e) Is this firm producing its capacity output?

Accepted Answer

a) The quantity is 20 meals a day.
b) Th

Question 15

Which one of the following statements is TRUE for BOTH perfect competition and monopolistic competition?

Accepted Answer

A)  Each type of firm faces a downward sloping demand curve. 
B)  Each type of firm produces a homogeneous product. 
C)  In the long run, firms in both industries make zero economic profit. 
D)  Each type of firm competes on product quality and price. 
A)  Each type of firm faces a downward sloping demand curve. 
B)  Each type of firm produces a homogeneous product. 
C)  In the long run, firms in both industries make zero economic profit. 
D)  Each type of firm competes on product quality and price.

Question 16

Brand name drugs are chemically identical to their generic counterparts. Yet, consumers often prefer the brand name product to the generic product. Making consumers think that a brand name drug differs from its generic counterpart is an example of

Accepted Answer

A)  product differentiation. 
B)  perfect competition. 
C)  oligopolistic behavior. 
D)  price taking behavior. 
A)  product differentiation. 
B)  perfect competition. 
C)  oligopolistic behavior. 
D)  price taking behavior.

Question 17

A textbook publisher is in monopolistic competition. If the firm spends nothing on advertising, it 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. If the firm spends $1,200 a day on advertising, it can increase the quantity of books sold at each price by 50 percent. If the firm advertises, its maximum economic profit is

Accepted Answer

A)  zero. 
B)  $800. 
C)  $1,200. 
D)  -$400. 
A)  zero. 
B)  $800. 
C)  $1,200. 
D)  -$400.

Question 18

-In the above figure of a monopolistically competitive firm, the marginal cost of the last unit produced is equal to ________ and is ________ marginal revenue.

Accepted Answer

A)  P2; greater than 
B)  P3; greater than 
C)  P1; greater than 
D)  P1; equal to 
A)  P2; greater than 
B)  P3; greater than 
C)  P1; greater than 
D)  P1; equal to

Question 19

Excess capacity refers to any unsold output due to insufficient demand.

Accepted Answer

A) True 
 B)False

Question 20

If a monopolistically competitive firm's marginal cost curve shifts upward, then the amount of output it produces

Accepted Answer

A)  increases. 
B)  stays the same. 
C)  decreases. 
D)  could increase, decrease, or stay the same but more information is needed. 
A)  increases. 
B)  stays the same. 
C)  decreases. 
D)  could increase, decrease, or stay the same but more information is needed.

"A firm in monopolistic competition maximizes its profit by producing where its price is equal to its marginal cost." Is the previous statement correct or incorrect?

-The figure above shows the situation facing Smart Digit, Inc., a firm in monopolistic competition that produces calculators. What quantity does the firm produce?

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

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.

How is a monopolistically competitive firm similar to a perfectly competitive firm?

-The above figure shows the demand and cost curves for a monopolistically competitive firm in the long run. The maximum economic profit this firm can make equal equals

"One of the defining features of monopolistic competition is product variety." Is the previous statement correct or incorrect?

A firm's markup is the amount by which exceeds .

ACME, Inc. operates in a market structure in which there are many other firms that find it easy to enter or exit. ACME is operating in ________ market.

Explain the role of advertising in monopolistic competition. Describe how advertising by all firms in a monopolistically competitive industry impacts a firm's ATC curve, its MC curve, its demand curve, and its MR curve.

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's economic profit is ________.

Small pizza parlors exist in just about every town. Anyone can open a pizza parlor, and the pizzas from one parlor typically have different tastes and sizes than pizzas from another parlor. Thus, the pizza industry is an example of

In monopolistic competition

Which one of the following statements is TRUE for BOTH perfect competition and monopolistic competition?

Brand name drugs are chemically identical to their generic counterparts. Yet, consumers often prefer the brand name product to the generic product. Making consumers think that a brand name drug differs from its generic counterpart is an example of

-In the above figure of a monopolistically competitive firm, the marginal cost of the last unit produced is equal to and is marginal revenue.

Excess capacity refers to any unsold output due to insufficient demand.

If a monopolistically competitive firm's marginal cost curve shifts upward, then the amount of output it produces

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

"A firm in monopolistic competition maximizes its profit by producing where its price is equal to its marginal cost." Is the previous statement correct or incorrect?

-The figure above shows the situation facing Smart Digit, Inc., a firm in monopolistic competition that produces calculators. What quantity does the firm produce?

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

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.

How is a monopolistically competitive firm similar to a perfectly competitive firm?

-The above figure shows the demand and cost curves for a monopolistically competitive firm in the long run. The maximum economic profit this firm can make equal equals

"One of the defining features of monopolistic competition is product variety." Is the previous statement correct or incorrect?

A firm's markup is the amount by which ________ exceeds ________.

ACME, Inc. operates in a market structure in which there are many other firms that find it easy to enter or exit. ACME is operating in ________ market.

Explain the role of advertising in monopolistic competition. Describe how advertising by all firms in a monopolistically competitive industry impacts a firm's ATC curve, its MC curve, its demand curve, and its MR curve.

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's economic profit is ________.

Small pizza parlors exist in just about every town. Anyone can open a pizza parlor, and the pizzas from one parlor typically have different tastes and sizes than pizzas from another parlor. Thus, the pizza industry is an example of

In monopolistic competition

Which one of the following statements is TRUE for BOTH perfect competition and monopolistic competition?

Brand name drugs are chemically identical to their generic counterparts. Yet, consumers often prefer the brand name product to the generic product. Making consumers think that a brand name drug differs from its generic counterpart is an example of

-In the above figure of a monopolistically competitive firm, the marginal cost of the last unit produced is equal to ________ and is ________ marginal revenue.

Excess capacity refers to any unsold output due to insufficient demand.

If a monopolistically competitive firm's marginal cost curve shifts upward, then the amount of output it produces

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

A firm's markup is the amount by which exceeds .

-In the above figure of a monopolistically competitive firm, the marginal cost of the last unit produced is equal to and is marginal revenue.