Question 1

In the long run, monopolistic competitive firms are considered to be operating inefficiently because their

Accepted Answer

A)  economic profits are positive. 
B)  economic profits are zero. 
C)  average total costs are not at a minimum. 
D)  marginal costs are rising. 
A)  economic profits are positive. 
B)  economic profits are zero. 
C)  average total costs are not at a minimum. 
D)  marginal costs are rising.

Question 2

Explain how information products are "special."

Accepted Answer

Producing an information product entails

Question 3

The type of advertising used for a search good is

Accepted Answer

A)  informational advertising. 
B)  persuasive advertising. 
C)  search advertising. 
D)  experience advertising. 
A)  informational advertising. 
B)  persuasive advertising. 
C)  search advertising. 
D)  experience advertising.

Question 4

In the long run, equilibrium positions that arise in both monopolistically competitive and perfectly competitive markets are

Accepted Answer

A)  MR = MC and P = MC. 
B)  P = ATC and P = MC. 
C)  MR = MC and P = ATC. 
D)  MR = MC = P. 
A)  MR = MC and P = MC. 
B)  P = ATC and P = MC. 
C)  MR = MC and P = ATC. 
D)  MR = MC = P.

Question 5

A monopolistically competitive firm differs from a perfectly competitive firm in the long run in that

Accepted Answer

A)  the demand curve faced by a monopolistically competitive firm is downward sloping, while the demand curve faced by a perfectly competitive firm is horizontal. 
B)  profits are positive for a monopolistically competitive firm and zero for a perfectly competitive firm. 
C)  profits are zero for a monopolistically competitive firm and positive for a perfectly competitive firm. 
D)  marginal cost equals the market price for a monopolistically competitive firm but not for a perfectly competitive firm. 
A)  the demand curve faced by a monopolistically competitive firm is downward sloping, while the demand curve faced by a perfectly competitive firm is horizontal. 
B)  profits are positive for a monopolistically competitive firm and zero for a perfectly competitive firm. 
C)  profits are zero for a monopolistically competitive firm and positive for a perfectly competitive firm. 
D)  marginal cost equals the market price for a monopolistically competitive firm but not for a perfectly competitive firm.

Question 6

Why can't a monopolistic competitor earn economic profits in the long run?

Accepted Answer

A monopolistic competitor may earn econo

Question 7

-In the above figure, total cost for this profit-maximizing monopolistically competitive firm is

Accepted Answer

A)  $91,000. 
B)  $50,000. 
C)  $70,000. 
D)  $72,000. 
A)  $91,000. 
B)  $50,000. 
C)  $70,000. 
D)  $72,000.

Question 8

All of Jill's friends have been telling Jill that she must see a certain movie but she is not sure that she will like it. The movie is a(n)

Accepted Answer

A)  experience good. 
B)  credence good. 
C)  logo good. 
D)  search good. 
A)  experience good. 
B)  credence good. 
C)  logo good. 
D)  search good.

Question 9

When a telemarketer calls you about a product, this is an example of

Accepted Answer

A)  direct marketing. 
B)  indirect marketing. 
C)  searching for a good. 
D)  persuasive marketing. 
A)  direct marketing. 
B)  indirect marketing. 
C)  searching for a good. 
D)  persuasive marketing.

Question 10

A market situation in which a large number of firms produce similar but not identical products is called

Accepted Answer

A)  pure monopoly. 
B)  monopolistically competitive. 
C)  oligopolistic behavior. 
D)  perfectly competitive. 
A)  pure monopoly. 
B)  monopolistically competitive. 
C)  oligopolistic behavior. 
D)  perfectly competitive.

Question 11

Compared with a firm in a perfectly competitive market, the demand curve faced by a monopolistically competitive firm is

Accepted Answer

A)  more elastic. 
B)  more inelastic. 
C)  perfectly elastic. 
D)  perfectly inelastic. 
A)  more elastic. 
B)  more inelastic. 
C)  perfectly elastic. 
D)  perfectly inelastic.

Question 12

A credence good is a product

Accepted Answer

A)  with qualities that consumers lack the expertise to assess without assistance. 
B)  that emphasizes the features of its product. 
C)  with characteristics that enable an individual to evaluate the product's quality in advance of a purchase. 
D)  that an individual must consume before the quality can be established. 
A)  with qualities that consumers lack the expertise to assess without assistance. 
B)  that emphasizes the features of its product. 
C)  with characteristics that enable an individual to evaluate the product's quality in advance of a purchase. 
D)  that an individual must consume before the quality can be established.

Question 13

If the producer of an information product engages in marginal cost pricing, it earns

Accepted Answer

A)  a normal profit. 
B)  an economic loss. 
C)  zero economic profits. 
D)  positive economic profits. 
A)  a normal profit. 
B)  an economic loss. 
C)  zero economic profits. 
D)  positive economic profits.

Question 14

The type of advertising that is used to induce a consumer to discover a previously unknown taste for an item is known as

Accepted Answer

A)  informational advertising. 
B)  persuasive advertising. 
C)  search advertising. 
D)  experience advertising. 
A)  informational advertising. 
B)  persuasive advertising. 
C)  search advertising. 
D)  experience advertising.

Question 15

Advertising intended to induce a consumer to discover a previously unknown taste or preference is

Accepted Answer

A)  persuasive advertising. 
B)  informational advertising. 
C)  direct advertising. 
D)  mass marketing advertising. 
A)  persuasive advertising. 
B)  informational advertising. 
C)  direct advertising. 
D)  mass marketing advertising.

Question 16

In the long run, a perfectly competitive market produces at ________, whereas the monopolistic competitive firm does not.

Accepted Answer

A)  the output at which the lowest average total cost of production is reached 
B)  an output level at which positive economic profits exist 
C)  zero economic profits 
D)  the point at which MR = MC=ATC 
A)  the output at which the lowest average total cost of production is reached 
B)  an output level at which positive economic profits exist 
C)  zero economic profits 
D)  the point at which MR = MC=ATC

Question 17

-In the above figure, the profit-maximizing monopolistically competitive firm will

Accepted Answer

A)  make a profit of $24,000. 
B)  make a profit of $30,000. 
C)  make a profit of $0. 
D)  incur a loss of $20,000. 
A)  make a profit of $24,000. 
B)  make a profit of $30,000. 
C)  make a profit of $0. 
D)  incur a loss of $20,000.

Question 18

A monopolistic competitor will maximize its profits at the output level at which

Accepted Answer

A)  TC = TR. 
B)  MC = MR. 
C)  the MC curve intersects the demand curve. 
D)  MR = ATC. 
A)  TC = TR. 
B)  MC = MR. 
C)  the MC curve intersects the demand curve. 
D)  MR = ATC.

Question 19

Why would Sunkist incur substantial costs to advertise and establish a brand name when the quality of its oranges can easily be evaluated by consumers?

Accepted Answer

Oranges might be considered as experienc

Question 20

In general, the demand for the product of a monopolistic competitor is

Accepted Answer

A)  unitary elastic. 
B)  relatively inelastic. 
C)  relatively elastic. 
D)  perfectly elastic. 
A)  unitary elastic. 
B)  relatively inelastic. 
C)  relatively elastic. 
D)  perfectly elastic.

Exam 25: Monopolistic Competition

In the long run, monopolistic competitive firms are considered to be operating inefficiently because their

Explain how information products are "special."

The type of advertising used for a search good is

In the long run, equilibrium positions that arise in both monopolistically competitive and perfectly competitive markets are

A monopolistically competitive firm differs from a perfectly competitive firm in the long run in that

Why can't a monopolistic competitor earn economic profits in the long run?

-In the above figure, total cost for this profit-maximizing monopolistically competitive firm is

All of Jill's friends have been telling Jill that she must see a certain movie but she is not sure that she will like it. The movie is a(n)

When a telemarketer calls you about a product, this is an example of

A market situation in which a large number of firms produce similar but not identical products is called

Compared with a firm in a perfectly competitive market, the demand curve faced by a monopolistically competitive firm is

A credence good is a product

If the producer of an information product engages in marginal cost pricing, it earns

The type of advertising that is used to induce a consumer to discover a previously unknown taste for an item is known as

Advertising intended to induce a consumer to discover a previously unknown taste or preference is

In the long run, a perfectly competitive market produces at ________, whereas the monopolistic competitive firm does not.

-In the above figure, the profit-maximizing monopolistically competitive firm will

A monopolistic competitor will maximize its profits at the output level at which

Why would Sunkist incur substantial costs to advertise and establish a brand name when the quality of its oranges can easily be evaluated by consumers?

In general, the demand for the product of a monopolistic competitor is

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

Exchange Rates and the Balance of Payments

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