Question 1

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

Accepted Answer

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

Question 2

A good that entails relatively high fixed costs associated with the use of knowledge and other information-intensive inputs as key factors of production is

Accepted Answer

A)  a logo good. 
B)  a search good. 
C)  a persuasive good. 
D)  an information product. 
A)  a logo good. 
B)  a search good. 
C)  a persuasive good. 
D)  an information product.

Question 3

Explain why the amount that firms spend on advertising depends on the characteristics of their products.

Accepted Answer

There are three types of goods: search g

Question 4

-Refer to the above figure. The above figure shows the cost structure of a firm producing an information product. Which curve represents average fixed cost?

Accepted Answer

A)  Curve 1 
B)  Curve 2 
C)  Curve 3 
D)  Any of the 3 could be AFC. 
A)  Curve 1 
B)  Curve 2 
C)  Curve 3 
D)  Any of the 3 could be AFC.

Question 5

The main objective of advertising for a monopolistically competitive firm is

Accepted Answer

A)  to differentiate the product and boost demand. 
B)  to reduce cost. 
C)  to earn long run profits. 
D)  none of the above. 
A)  to differentiate the product and boost demand. 
B)  to reduce cost. 
C)  to earn long run profits. 
D)  none of the above.

Question 6

-Refer to the above figure. The above figure shows the cost structure of a firm producing an information product. Which curve represents average total cost?

Accepted Answer

A)  Any of the 3 could be ATC. 
B)  Curve 1 
C)  Curve 2 
D)  Curve 3 
A)  Any of the 3 could be ATC. 
B)  Curve 1 
C)  Curve 2 
D)  Curve 3

Question 7

-Use the above figure. When it maximizes its economic profits, the monopolistically competitive firm depicted in the figure

Accepted Answer

A)  is earning an economic profit. 
B)  is earning an accounting profit. 
C)  is earning an economic loss. 
D)  must increase output to reduce the ATC. 
A)  is earning an economic profit. 
B)  is earning an accounting profit. 
C)  is earning an economic loss. 
D)  must increase output to reduce the ATC.

Question 8

In the long run, the economic profits of a monopolistically competitive firm

Accepted Answer

A)  will tend to be larger than in the short run. 
B)  equal zero. 
C)  will be the average short-run profits earned in the last five years. 
D)  will be the same as in the short run. 
A)  will tend to be larger than in the short run. 
B)  equal zero. 
C)  will be the average short-run profits earned in the last five years. 
D)  will be the same as in the short run.

Question 9

-Use the above figure. The total revenue earned by the monopolistically competitive firm is

Accepted Answer

A)  $300. 
B)  $285. 
C)  $180. 
D)  $255. 
A)  $300. 
B)  $285. 
C)  $180. 
D)  $255.

Question 10

Which of the following products is most likely to be sold in a monopolistically competitive market?

Accepted Answer

A)  fast food 
B)  coal 
C)  wheat 
D)  electricity 
A)  fast food 
B)  coal 
C)  wheat 
D)  electricity

Question 11

Which of the following statements is INCORRECT regarding the properties of information products?

Accepted Answer

A)  Providing an information product entails incurring relatively high fixed costs. 
B)  The average total cost curve for a firm that sells an information product slopes upward. 
C)  The firm experiences economies of operation in the short run. 
D)  In the long run, the producer earns sufficient revenue to cover the opportunity cost of capital. 
A)  Providing an information product entails incurring relatively high fixed costs. 
B)  The average total cost curve for a firm that sells an information product slopes upward. 
C)  The firm experiences economies of operation in the short run. 
D)  In the long run, the producer earns sufficient revenue to cover the opportunity cost of capital.

Question 12

If a customer buys an airline ticket based only on the price of the ticket, then the airline ticket 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 13

Advertising by monopolistically competitive firms can do all of the following EXCEPT

Accepted Answer

A)  lower the consumer's purchase price. 
B)  help differentiate a firm's product. 
C)  act as a signal to consumers that the company is serious about staying in business. 
D)  result in increased profits for the advertising firm. 
A)  lower the consumer's purchase price. 
B)  help differentiate a firm's product. 
C)  act as a signal to consumers that the company is serious about staying in business. 
D)  result in increased profits for the advertising firm.

Question 14

All of the following are assumptions of monopolistic competition EXCEPT

Accepted Answer

A)  many buyers and sellers. 
B)  homogeneous product. 
C)  easy entry of new firms in the long run. 
D)  profit-maximizing behavior. 
A)  many buyers and sellers. 
B)  homogeneous product. 
C)  easy entry of new firms in the long run. 
D)  profit-maximizing behavior.

Question 15

A monopolistic competitor would face a demand curve with a

Accepted Answer

A)  positive slope. 
B)  negative slope. 
C)  constant slope. 
D)  slope equal to 0. 
A)  positive slope. 
B)  negative slope. 
C)  constant slope. 
D)  slope equal to 0.

Question 16

The short-run profit-maximizing output level for a monopolistically competitive firm is the point at which

Accepted Answer

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

Question 17

Because the products of firms in a monopolistically competitive market are not homogeneous, the

Accepted Answer

A)  demand curve for the industry is the same for the firm. 
B)  demand curve for the firm's product is horizontal. 
C)  demand curve for the firm's product is downward sloping. 
D)  demand curve for the firm's product is upward sloping. 
A)  demand curve for the industry is the same for the firm. 
B)  demand curve for the firm's product is horizontal. 
C)  demand curve for the firm's product is downward sloping. 
D)  demand curve for the firm's product is upward sloping.

Question 18

In the long run, in a monopolistically competitive market, price will be

Accepted Answer

A)  equal to MR. 
B)  equal to MC. 
C)  greater ATC. 
D)  equal to ATC. 
A)  equal to MR. 
B)  equal to MC. 
C)  greater ATC. 
D)  equal to ATC.

Question 19

-In the above figure for a monopolistically competitive firm, the total cost at the profit-maximizing point is

Accepted Answer

A)  $480 
B)  $400 
C)  $540 
D)  $880 
A)  $480 
B)  $400 
C)  $540 
D)  $880

Question 20

In order to differentiate their product brands from those of competing firms, monopolistically competitive firms

Accepted Answer

A)  equate marginal cost to marginal revenue to determine the profit maximizing quantity. 
B)  spread false rumors about their competitors. 
C)  take their competitor's reactions to changes in their policies into account. 
D)  advertise their product. 
A)  equate marginal cost to marginal revenue to determine the profit maximizing quantity. 
B)  spread false rumors about their competitors. 
C)  take their competitor's reactions to changes in their policies into account. 
D)  advertise their product.

Exam 25: Monopolistic Competition

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

A good that entails relatively high fixed costs associated with the use of knowledge and other information-intensive inputs as key factors of production is

Explain why the amount that firms spend on advertising depends on the characteristics of their products.

-Refer to the above figure. The above figure shows the cost structure of a firm producing an information product. Which curve represents average fixed cost?

The main objective of advertising for a monopolistically competitive firm is

-Refer to the above figure. The above figure shows the cost structure of a firm producing an information product. Which curve represents average total cost?

-Use the above figure. When it maximizes its economic profits, the monopolistically competitive firm depicted in the figure

In the long run, the economic profits of a monopolistically competitive firm

-Use the above figure. The total revenue earned by the monopolistically competitive firm is

Which of the following products is most likely to be sold in a monopolistically competitive market?

Which of the following statements is INCORRECT regarding the properties of information products?

If a customer buys an airline ticket based only on the price of the ticket, then the airline ticket is a(n)

Advertising by monopolistically competitive firms can do all of the following EXCEPT

All of the following are assumptions of monopolistic competition EXCEPT

A monopolistic competitor would face a demand curve with a

The short-run profit-maximizing output level for a monopolistically competitive firm is the point at which

Because the products of firms in a monopolistically competitive market are not homogeneous, the

In the long run, in a monopolistically competitive market, price will be

-In the above figure for a monopolistically competitive firm, the total cost at the profit-maximizing point is

In order to differentiate their product brands from those of competing firms, monopolistically competitive firms

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

Filters