Question 1

-Refer to the above figure. Economic profits for this firm are

Accepted Answer

A)  negative. 
B)  zero. 
C)  positive. 
D)  undetermined without more information. 
A)  negative. 
B)  zero. 
C)  positive. 
D)  undetermined without more information.

Question 2

The demand curve for the product of a monopolistically competitive firm

Accepted Answer

A)  is perfectly elastic. 
B)  is unitary elastic. 
C)  is downward sloping. 
D)  is perfectly inelastic. 
A)  is perfectly elastic. 
B)  is unitary elastic. 
C)  is downward sloping. 
D)  is perfectly inelastic.

Question 3

In a monopolistically competitive market if the additional revenue generated from advertising equals the additional cost of advertising, the firm should

Accepted Answer

A)  advertise more to increase sales. 
B)  advertise more to lower marginal costs. 
C)  maintain its current amount of advertising. 
D)  advertise less to decrease costs. 
A)  advertise more to increase sales. 
B)  advertise more to lower marginal costs. 
C)  maintain its current amount of advertising. 
D)  advertise less to decrease costs.

Question 4

A monopolistic competitor is like a competitive firm in the long run, because

Accepted Answer

A)  it earns positive economic profits. 
B)  it earns zero economic profits 
C)  both firms will earn positive economic profits. 
D)  both firms will increase price to increase profits. 
A)  it earns positive economic profits. 
B)  it earns zero economic profits 
C)  both firms will earn positive economic profits. 
D)  both firms will increase price to increase profits.

Question 5

For the monopolistically competitive firm, in both the short run and the long run

Accepted Answer

A)  the demand curve is inelastic. 
B)  price will exceed marginal cost. 
C)  there will be no economic profit. 
D)  production will be at minimum average cost. 
A)  the demand curve is inelastic. 
B)  price will exceed marginal cost. 
C)  there will be no economic profit. 
D)  production will be at minimum average cost.

Question 6

Judy has just looked through her favorite catalog that came in the mail and has placed an order. The catalog is an example of

Accepted Answer

A)  mass marketing. 
B)  direct marketing. 
C)  indirect marketing. 
D)  interactive marketing. 
A)  mass marketing. 
B)  direct marketing. 
C)  indirect marketing. 
D)  interactive marketing.

Question 7

A monopolistic competitor is in long-run equilibrium when

Accepted Answer

A)  economic profits are equal to zero and the average total cost curve is tangent to the demand curve. 
B)  economic profits are equal to zero and the marginal cost curve is tangent to the demand curve. 
C)  economic profits are greater than zero and the average total cost curve is tangent to the demand curve. 
D)  economic profits are greater than zero and the marginal cost curve is tangent to the demand curve. 
A)  economic profits are equal to zero and the average total cost curve is tangent to the demand curve. 
B)  economic profits are equal to zero and the marginal cost curve is tangent to the demand curve. 
C)  economic profits are greater than zero and the average total cost curve is tangent to the demand curve. 
D)  economic profits are greater than zero and the marginal cost curve is tangent to the demand curve.

Question 8

The demand curve faced by a monopolistically competitive firm is

Accepted Answer

A)  horizontal. 
B)  vertical. 
C)  downward sloping. 
D)  upward sloping. 
A)  horizontal. 
B)  vertical. 
C)  downward sloping. 
D)  upward sloping.

Question 9

Monopolistic competition and perfect competition are different in that

Accepted Answer

A)  only monopolistically competitive firms advertise. 
B)  only monopolistically competitive firms can earn economic losses in the short-run. 
C)  only perfectly competitive firms maximize profits where marginal revenue equals marginal cost. 
D)  only perfectly competitive firms are characterized by long-run economic profits of zero. 
A)  only monopolistically competitive firms advertise. 
B)  only monopolistically competitive firms can earn economic losses in the short-run. 
C)  only perfectly competitive firms maximize profits where marginal revenue equals marginal cost. 
D)  only perfectly competitive firms are characterized by long-run economic profits of zero.

Question 10

Which of the following is NOT a characteristic of the demand curve faced by a firm in a monopolistically competitive market?

Accepted Answer

A)  The demand curve is downward sloping. 
B)  The slope of the demand curve is negative. 
C)  The firm will produce where the demand curve is inelastic. 
D)  The firm will produce where the demand curve is elastic. 
A)  The demand curve is downward sloping. 
B)  The slope of the demand curve is negative. 
C)  The firm will produce where the demand curve is inelastic. 
D)  The firm will produce where the demand curve is elastic.

Question 11

When you see an advertisement on TV for a hair care product in which the actor using the product is depicted as beautiful and happy, this is

Accepted Answer

A)  informational advertising. 
B)  direct market advertising. 
C)  indirect market advertising. 
D)  persuasive advertising. 
A)  informational advertising. 
B)  direct market advertising. 
C)  indirect market advertising. 
D)  persuasive advertising.

Question 12

The ATC curve and the AFC curve for information products (e.g., software) in the short run are

Accepted Answer

A)  downward sloping. 
B)  horizontal. 
C)  upward sloping. 
D)  vertical. 
A)  downward sloping. 
B)  horizontal. 
C)  upward sloping. 
D)  vertical.

Question 13

In the long run, both monopolistically competitive and perfectly competitive firms attain

Accepted Answer

A)  lowest cost production. 
B)  positive economic profits. 
C)  zero economic profits. 
D)  productive efficiency. 
A)  lowest cost production. 
B)  positive economic profits. 
C)  zero economic profits. 
D)  productive efficiency.

Question 14

A firm's trademark is protected from misuse if it is registered with the

Accepted Answer

A)  U.S.D.A. 
B)  U.S. Patent and Trademark Office. 
C)  U.S. Supreme Court. 
D)  F.C.C. 
A)  U.S.D.A. 
B)  U.S. Patent and Trademark Office. 
C)  U.S. Supreme Court. 
D)  F.C.C.

Question 15

A distinguishing characteristic of producers of information products is their

Accepted Answer

A)  low fixed costs. 
B)  short-run economies of operation. 
C)  low average fixed costs. 
D)  low overhead. 
A)  low fixed costs. 
B)  short-run economies of operation. 
C)  low average fixed costs. 
D)  low overhead.

Question 16

Which of the following statements about a monopolistically competitive firm is TRUE?

Accepted Answer

A)  A monopolistically competitive firm does not always equate marginal cost to marginal revenue because it uses other means to maximize profits. 
B)  A monopolistically competitive firm maximizes profits by charging a price equal to marginal cost. 
C)  A monopolistically competitive firm produces the quantity at the point at which the demand curve crosses the marginal cost curve. 
D)  A monopolistically competitive firm maximizes profits when it produces the quantity at which marginal cost equals marginal revenue. 
A)  A monopolistically competitive firm does not always equate marginal cost to marginal revenue because it uses other means to maximize profits. 
B)  A monopolistically competitive firm maximizes profits by charging a price equal to marginal cost. 
C)  A monopolistically competitive firm produces the quantity at the point at which the demand curve crosses the marginal cost curve. 
D)  A monopolistically competitive firm maximizes profits when it produces the quantity at which marginal cost equals marginal revenue.

Question 17

The demand curve for the product of a monopolistic competitor is

Accepted Answer

A)  downward sloping. 
B)  horizontal. 
C)  vertical. 
D)  unitary elastic. 
A)  downward sloping. 
B)  horizontal. 
C)  vertical. 
D)  unitary elastic.

Question 18

When a pharmaceutical company advertises that its allergy medication is clinically proven to alleviate hay fever symptoms, the pharmaceutical company is engaging in

Accepted Answer

A)  informational advertising. 
B)  trademark protection. 
C)  persuasive advertising. 
D)  direct marketing. 
A)  informational advertising. 
B)  trademark protection. 
C)  persuasive advertising. 
D)  direct marketing.

Question 19

Which will be true for a monopolistic competitor experiencing short-run losses?

Accepted Answer

A) P > ATC B) P = ATC C) P < ATC D) P < MC A) P > ATC B) P = ATC C) P < ATC D) P < MC

Question 20

Which of the following is FALSE about a comparison between a perfectly competitive firm and a monopolistically competitive firm?

Accepted Answer

A)  A perfectly competitive firm has a horizontal demand curve, while a monopolistically competitive firm has a downward sloping demand curve. 
B)  In the short run, a perfectly competitive firm will earn zero economic profits, while a monopolistically competitive firm will earn positive economic profits. 
C)  Both the perfectly competitive and monopolistically competitive firm will earn economic profits equal to zero in the long-run. 
D)  In the long run, the perfectly competitive firm will produce at the minimum of the average total cost curve, while the monopolistically competitive firm will produce to the left of the minimum of the average total cost curve. 
A)  A perfectly competitive firm has a horizontal demand curve, while a monopolistically competitive firm has a downward sloping demand curve. 
B)  In the short run, a perfectly competitive firm will earn zero economic profits, while a monopolistically competitive firm will earn positive economic profits. 
C)  Both the perfectly competitive and monopolistically competitive firm will earn economic profits equal to zero in the long-run. 
D)  In the long run, the perfectly competitive firm will produce at the minimum of the average total cost curve, while the monopolistically competitive firm will produce to the left of the minimum of the average total cost curve.

Exam 25: Monopolistic Competition

-Refer to the above figure. Economic profits for this firm are

The demand curve for the product of a monopolistically competitive firm

In a monopolistically competitive market if the additional revenue generated from advertising equals the additional cost of advertising, the firm should

A monopolistic competitor is like a competitive firm in the long run, because

For the monopolistically competitive firm, in both the short run and the long run

Judy has just looked through her favorite catalog that came in the mail and has placed an order. The catalog is an example of

A monopolistic competitor is in long-run equilibrium when

The demand curve faced by a monopolistically competitive firm is

Monopolistic competition and perfect competition are different in that

Which of the following is NOT a characteristic of the demand curve faced by a firm in a monopolistically competitive market?

When you see an advertisement on TV for a hair care product in which the actor using the product is depicted as beautiful and happy, this is

The ATC curve and the AFC curve for information products (e.g., software) in the short run are

In the long run, both monopolistically competitive and perfectly competitive firms attain

A firm's trademark is protected from misuse if it is registered with the

A distinguishing characteristic of producers of information products is their

Which of the following statements about a monopolistically competitive firm is TRUE?

The demand curve for the product of a monopolistic competitor is

When a pharmaceutical company advertises that its allergy medication is clinically proven to alleviate hay fever symptoms, the pharmaceutical company is engaging in

Which will be true for a monopolistic competitor experiencing short-run losses?

Which of the following is FALSE about a comparison between a perfectly competitive firm and a monopolistically competitive firm?

The Nature of Economics

Scarcity and the World of Trade-Offs

Demand and Supply

Extensions of Demand and Supply Analysis

Public Spending and Public Choice

Funding the Public Sector

The Macroeconomy: Unemployment, Inflation, and Deflation

Measuring the Economys Performance

Global Economic Growth and Development

Real GDP and the Price Level in the Long Run

Classical and Keynesian Macro Analyses

Consumption, Real GDP, and the Multiplier

Fiscal Policy

Deficit Spending and the Public Debt

Money, Banking, and Central Banking

Domestic and International Dimensions of Monetary Policy

Stabilization in an Integrated World Economy

Policies and Prospects for Global Economic Growth

Demand and Supply Elasticity

Consumer Choice

Rents, Profits, and the Financial Environment of Business

The Firm: Cost and Output Determination

Perfect Competition

Monopoly

Oligopoly and Strategic Behavior

Regulation and Antitrust Policy in a Globalized Economy

The Labor Market: Demand, Supply and Outsourcing

Unions and Labor Market Monopoly Power

Income, Poverty, and Health Care

Environmental Economics

Comparative Advantage and the Open Economy

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