Question 1

Steve can tell if his car has been fixed or not-it works, or it doesn't-but he cannot tell how it was fixed. The car repair 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 2

In the long run, firms in a monopolistically competitive market

Accepted Answer

A)  usually earn positive economic profits. 
B)  always earn monopoly profits. 
C)  usually earn economic losses. 
D)  earn zero economic profits. 
A)  usually earn positive economic profits. 
B)  always earn monopoly profits. 
C)  usually earn economic losses. 
D)  earn zero economic profits.

Question 3

The key feature of monopolistic competition is

Accepted Answer

A)  interdependence of the firms. 
B)  lack of advertisement. 
C)  product differentiation. 
D)  the small number of firms in the industry. 
A)  interdependence of the firms. 
B)  lack of advertisement. 
C)  product differentiation. 
D)  the small number of firms in the industry.

Question 4

The type of advertising that emphasizes the features of its product 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 5

If a firm produces an experience good, its mode of advertising will be

Accepted Answer

A)  persuasive advertising. 
B)  direct advertising. 
C)  not to advertise. 
D)  none of the above. 
A)  persuasive advertising. 
B)  direct advertising. 
C)  not to advertise. 
D)  none of the above.

Question 6

In long-run equilibrium in a monopolistically competitive industry, a firm will

Accepted Answer

A)  always earn an economic profit. 
B)  produce an output rate at which P = MC. 
C)  produce at a point to the left of the minimum point on its average total cost curve. 
D)  have a perfectly elastic demand curve. 
A)  always earn an economic profit. 
B)  produce an output rate at which P = MC. 
C)  produce at a point to the left of the minimum point on its average total cost curve. 
D)  have a perfectly elastic demand curve.

Question 7

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

Accepted Answer

A)  $2,080. 
B)  $3,150. 
C)  $1,600. 
D)  $1,900. 
A)  $2,080. 
B)  $3,150. 
C)  $1,600. 
D)  $1,900.

Question 8

Explain what will happen if firms in a monopolistically competitive industry are earning positive economic profits.

Accepted Answer

Positive economic profits will attract n

Question 9

Entry into a monopolistic competitive industry

Accepted Answer

A)  is easy. 
B)  is hard. 
C)  requires governmental approval. 
D)  requires collusion. 
A)  is easy. 
B)  is hard. 
C)  requires governmental approval. 
D)  requires collusion.

Question 10

Which of the following describes monopolistic competition?

Accepted Answer

A)  Homogenous products 
B)  P = MR = MC 
C)  Advertising plays a key role 
D)  There is only one seller in the industry 
A)  Homogenous products 
B)  P = MR = MC 
C)  Advertising plays a key role 
D)  There is only one seller in the industry

Question 11

-The above table depicts prices, quantities, and marginal costs faced by the campus bookstore. Based on marginal analysis, what is the profit-maximizing level of output for the bookstore?

Accepted Answer

A)  1 book 
B)  2 books 
C)  3 books 
D)  4 books 
A)  1 book 
B)  2 books 
C)  3 books 
D)  4 books

Question 12

A good with qualities that consumers lack the experience to assess without assistance is called

Accepted Answer

A)  a credence good. 
B)  a search good. 
C)  an experience good. 
D)  a persuasive good. 
A)  a credence good. 
B)  a search good. 
C)  an experience good. 
D)  a persuasive good.

Question 13

A product that must be actually consumed before the quality of the product can be determined is a(n)

Accepted Answer

A)  search good. 
B)  consumable good. 
C)  consumption good. 
D)  experience good. 
A)  search good. 
B)  consumable good. 
C)  consumption good. 
D)  experience good.

Question 14

Why do firms in a monopolistically competitive industry advertise?

Accepted Answer

In a monopolistically competitive indust

Question 15

In the long run, a monopolistically competitive firm

Accepted Answer

A)  earns positive economic profits. 
B)  earns zero economic profits. 
C)  earns negative economic profits. 
D)  can have positive, zero, or negative profits. 
A)  earns positive economic profits. 
B)  earns zero economic profits. 
C)  earns negative economic profits. 
D)  can have positive, zero, or negative profits.

Question 16

In both a monopolistically competitive market and a pure monopoly market, firms

Accepted Answer

A)  can make long-run profits. 
B)  set price greater than marginal cost. 
C)  are protected by entry barriers. 
D)  advertise extensively. 
A)  can make long-run profits. 
B)  set price greater than marginal cost. 
C)  are protected by entry barriers. 
D)  advertise extensively.

Question 17

In the long run, if some monopolistically competitive firms are earning economic losses then

Accepted Answer

A)  firms will leave the industry. 
B)  raise prices until they earn economic profits. 
C)  they will increase production until marginal costs fall. 
D)  new firms will enter the industry. 
A)  firms will leave the industry. 
B)  raise prices until they earn economic profits. 
C)  they will increase production until marginal costs fall. 
D)  new firms will enter the industry.

Question 18

Products can be differentiated

Accepted Answer

A)  if the buyers are homogeneous and their number increases. 
B)  by location and by brand name. 
C)  only by brand name. 
D)  none of the above 
A)  if the buyers are homogeneous and their number increases. 
B)  by location and by brand name. 
C)  only by brand name. 
D)  none of the above

Question 19

-In the above figure for a monopolistically competitive firm, the profit-maximizing output and price are respectively

Accepted Answer

A)  80 units and $11. 
B)  50 units and $8. 
C)  60 units and $9. 
D)  60 units and $14. 
A)  80 units and $11. 
B)  50 units and $8. 
C)  60 units and $9. 
D)  60 units and $14.

Question 20

In a monopolistically competitive market, having a large number of firms in the market means that

Accepted Answer

A)  no firm attempts to take into account the reaction of rival firms. 
B)  individual firms will have a large portion of the market giving them monopoly power. 
C)  firms will get together and collude because this will be the only way to earn monopoly profits. 
D)  firms will cooperate with each other to drive competitors out of the market. 
A)  no firm attempts to take into account the reaction of rival firms. 
B)  individual firms will have a large portion of the market giving them monopoly power. 
C)  firms will get together and collude because this will be the only way to earn monopoly profits. 
D)  firms will cooperate with each other to drive competitors out of the market.

Exam 25: Monopolistic Competition

Steve can tell if his car has been fixed or not-it works, or it doesn't-but he cannot tell how it was fixed. The car repair is a(n)

In the long run, firms in a monopolistically competitive market

The key feature of monopolistic competition is

The type of advertising that emphasizes the features of its product is

If a firm produces an experience good, its mode of advertising will be

In long-run equilibrium in a monopolistically competitive industry, a firm will

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

Explain what will happen if firms in a monopolistically competitive industry are earning positive economic profits.

Entry into a monopolistic competitive industry

Which of the following describes monopolistic competition?

-The above table depicts prices, quantities, and marginal costs faced by the campus bookstore. Based on marginal analysis, what is the profit-maximizing level of output for the bookstore?

A good with qualities that consumers lack the experience to assess without assistance is called

A product that must be actually consumed before the quality of the product can be determined is a(n)

Why do firms in a monopolistically competitive industry advertise?

In the long run, a monopolistically competitive firm

In both a monopolistically competitive market and a pure monopoly market, firms

In the long run, if some monopolistically competitive firms are earning economic losses then

Products can be differentiated

-In the above figure for a monopolistically competitive firm, the profit-maximizing output and price are respectively

In a monopolistically competitive market, having a large number of firms in the market means that

The Nature of Economics

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Public Spending and Public Choice

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