Question 1

In a long-run monopolistically competitive equilibrium,

Accepted Answer

A)  P = ATC, and ATC is not at its minimum value. 
B)  P = ATC, and ATC is at its minimum value. 
C)  P > ATC, and ATC is at its minimum value. 
D)  P > ATC, and ATC is not at its minimum value. 
A)  P = ATC, and ATC is not at its minimum value. 
B)  P = ATC, and ATC is at its minimum value. 
C)  P > ATC, and ATC is at its minimum value. 
D)  P > ATC, and ATC is not at its minimum value.

Question 2

Which of the following statements is true about the economic profits earned by a monopolistic competitor firm in the long run?

Accepted Answer

A)  Economic profits can be positive since firms have some degree of monopoly power. 
B)  Economic profits will be positive since the firm has a downward sloping demand curve. 
C)  Economic profits will tend towards zero since positive profits will attract new firms into the industry. 
D)  Economic profits can be negative since there is so much competition in the market. 
A)  Economic profits can be positive since firms have some degree of monopoly power. 
B)  Economic profits will be positive since the firm has a downward sloping demand curve. 
C)  Economic profits will tend towards zero since positive profits will attract new firms into the industry. 
D)  Economic profits can be negative since there is so much competition in the market.

Question 3

A computer game is an example of

Accepted Answer

A)  a public use product. 
B)  an information product. 
C)  a capital good. 
D)  a credibility product. 
A)  a public use product. 
B)  an information product. 
C)  a capital good. 
D)  a credibility product.

Question 4

-Refer to the above figure. Which panel shows a possible short-run equilibrium for monopolistic competition, but is not also a long-run equilibrium?

Accepted Answer

A)  Panel A. 
B)  Panel B. 
C)  Panel C. 
D)  Panel D. 
A)  Panel A. 
B)  Panel B. 
C)  Panel C. 
D)  Panel D.

Question 5

For an information product, why a profit-maximizing firm unable to practice marginal cost pricing? How is its price determined in the long run?

Accepted Answer

An information product has the character

Question 6

In the 1920s and 1930s, economists became increasingly aware that there were industries that did not fit the model of perfect competition or pure monopoly. Two separate theories of monopolistic competition resulted. Edward Chamberlin of Harvard published the Theory of Monopolistic Competition in 1933. Chamberlin defined monopolistic competition as

Accepted Answer

A)  a relatively large number of producers offering similar but differentiated products. 
B)  a relatively small number of producers offering similar but differentiated products. 
C)  a market situation in which a large number of firms produce identical products. 
D)  a market situation in which a small number of firms produce similar products. 
A)  a relatively large number of producers offering similar but differentiated products. 
B)  a relatively small number of producers offering similar but differentiated products. 
C)  a market situation in which a large number of firms produce identical products. 
D)  a market situation in which a small number of firms produce similar products.

Question 7

A very high fixed cost and a relatively low marginal cost is associated with

Accepted Answer

A)  every type of good or product. 
B)  an information product. 
C)  a persuasive good. 
D)  an experience good. 
A)  every type of good or product. 
B)  an information product. 
C)  a persuasive good. 
D)  an experience good.

Question 8

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

Accepted Answer

A)  $540 
B)  $840 
C)  $400 
D)  $880 
A)  $540 
B)  $840 
C)  $400 
D)  $880

Question 9

Which of the following is NOT a characteristic of monopolistic competition?

Accepted Answer

A)  large number of sellers 
B)  sales promotion and advertising 
C)  homogeneous product 
D)  easy entry of new firms in the long run 
A)  large number of sellers 
B)  sales promotion and advertising 
C)  homogeneous product 
D)  easy entry of new firms in the long run

Exam 25: Monopolistic Competition

In a long-run monopolistically competitive equilibrium,

Which of the following statements is true about the economic profits earned by a monopolistic competitor firm in the long run?

A computer game is an example of

-Refer to the above figure. Which panel shows a possible short-run equilibrium for monopolistic competition, but is not also a long-run equilibrium?

For an information product, why a profit-maximizing firm unable to practice marginal cost pricing? How is its price determined in the long run?

A very high fixed cost and a relatively low marginal cost is associated with

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

Which of the following is NOT a characteristic of monopolistic competition?

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

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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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