Question 1

For a monopolistic competitive firm, which of the following is true in the long run?

Accepted Answer

A)  ATC is minimized. 
B)  Economic profit is zero. 
C)  P = MC. 
D)  All of the above. 
A)  ATC is minimized. 
B)  Economic profit is zero. 
C)  P = MC. 
D)  All of the above.

Question 2

For a firm that sells an information product, the long-run equilibrium exists at a point where

Accepted Answer

A)  price equals average total cost. 
B)  price equals average variable cost. 
C)  price equals average fixed cost. 
D)  price equals marginal cost. 
A)  price equals average total cost. 
B)  price equals average variable cost. 
C)  price equals average fixed cost. 
D)  price equals marginal cost.

Question 3

John has just tried on the most comfortable pair of pants that he has ever known. The pants are a(n)

Accepted Answer

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

Question 4

Information products (e.g., software)

Accepted Answer

A)  have relatively high fixed costs but low marginal and average variable costs. 
B)  have relatively low fixed costs but high marginal and average variable costs. 
C)  have relatively high fixed costs and relatively high marginal and average variable costs. 
D)  have relatively low fixed costs and relatively low marginal and average variable costs. 
A)  have relatively high fixed costs but low marginal and average variable costs. 
B)  have relatively low fixed costs but high marginal and average variable costs. 
C)  have relatively high fixed costs and relatively high marginal and average variable costs. 
D)  have relatively low fixed costs and relatively low marginal and average variable costs.

Question 5

Products such as office supplies are examples of

Accepted Answer

A)  experience goods. 
B)  simple goods. 
C)  search goods. 
D)  selective goods. 
A)  experience goods. 
B)  simple goods. 
C)  search goods. 
D)  selective goods.

Question 6

In the long run, what level of economic profits can a monopolistic competitor expect to receive?

Accepted Answer

A)  positive 
B)  zero 
C)  negative 
D)  either negative or positive, depending on the demand for its product and its costs 
A)  positive 
B)  zero 
C)  negative 
D)  either negative or positive, depending on the demand for its product and its costs

Question 7

If a monopolistically competitive firm selling an information product engages in marginal cost pricing, it will

Accepted Answer

A)  earn additional profits. 
B)  fail to earn sufficient revenues to cover its fixed costs. 
C)  lower costs. 
D)  break even. 
A)  earn additional profits. 
B)  fail to earn sufficient revenues to cover its fixed costs. 
C)  lower costs. 
D)  break even.

Question 8

Which of the following is the long-run outcome for monopolistic competition?

Accepted Answer

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

Question 9

The meaning of interdependence in a monopolistically competitive market is

Accepted Answer

A)  that it is difficult for firms to get together to collude. 
B)  that products produced by firms will be good substitutes. 
C)  that firms will not take into account the reaction of rival firms. 
D)  that price rigging commonly occurs. 
A)  that it is difficult for firms to get together to collude. 
B)  that products produced by firms will be good substitutes. 
C)  that firms will not take into account the reaction of rival firms. 
D)  that price rigging commonly occurs.

Question 10

How does an information product differ from a product such as a desk?

Accepted Answer

An information product has a very high f

Question 11

The greater the the number and closeness of substitutes available between monopolistically competitive firms,

Accepted Answer

A)  the greater the ability of a firm to raise its price above the price of close substitutes . 
B)  the smaller the ability of a firm to raise its price above the price of close substitutes. 
C)  the more inelastic the demand curve. 
D)  the greater the positive economic profits for a single firm. 
A)  the greater the ability of a firm to raise its price above the price of close substitutes . 
B)  the smaller the ability of a firm to raise its price above the price of close substitutes. 
C)  the more inelastic the demand curve. 
D)  the greater the positive economic profits for a single firm.

Question 12

-Use the above figure. The profit-maximizing output and price for this monopolistically competitive firm are respectively,

Accepted Answer

A)  100 and $19. 
B)  160 and $13. 
C)  160 and $16. 
D)  210 and $15. 
A)  100 and $19. 
B)  160 and $13. 
C)  160 and $16. 
D)  210 and $15.

Question 13

The two economists associated with the development of the theory of monopolistic competition were

Accepted Answer

A)  Joan Robinson and Edward Chamberlin. 
B)  David Hume and Adam Smith. 
C)  John Neville Keynes and John Maynard Keynes. 
D)  Carl Menger and Eugen Von Bohm-Bawerk. 
A)  Joan Robinson and Edward Chamberlin. 
B)  David Hume and Adam Smith. 
C)  John Neville Keynes and John Maynard Keynes. 
D)  Carl Menger and Eugen Von Bohm-Bawerk.

Question 14

-In the above figure, the monopolistically competitive firm's profit-maximizing output is

Accepted Answer

A)  1,000 units. 
B)  300 units. 
C)  900 units. 
D)  700 units. 
A)  1,000 units. 
B)  300 units. 
C)  900 units. 
D)  700 units.

Question 15

In the long run, a monopolistic competitor will produce to the point at which

Accepted Answer

A)  average total costs are at the minimum of possible ATC. 
B)  average total costs are higher than the minimum of possible ATC. 
C)  resources are used at the lowest possible cost. 
D)  at the lowest possible price. 
A)  average total costs are at the minimum of possible ATC. 
B)  average total costs are higher than the minimum of possible ATC. 
C)  resources are used at the lowest possible cost. 
D)  at the lowest possible price.

Question 16

Long-run equilibrium is characterized by zero profits in

Accepted Answer

A)  monopolistic competition only. 
B)  perfect competition only. 
C)  both perfect competition and monopolistic competition. 
D)  market structures in which there are barriers to entry. 
A)  monopolistic competition only. 
B)  perfect competition only. 
C)  both perfect competition and monopolistic competition. 
D)  market structures in which there are barriers to entry.

Question 17

Considering the relevant market structures, which is an INCORRECT statement?

Accepted Answer

A)  In a perfectly competitive situation, there is an extremely large number of firms. 
B)  In pure monopoly, there is only one firm. 
C)  In monopolistic competition, there is a large number of firms. 
D)  In any market situation, the number of firms is not very important. 
A)  In a perfectly competitive situation, there is an extremely large number of firms. 
B)  In pure monopoly, there is only one firm. 
C)  In monopolistic competition, there is a large number of firms. 
D)  In any market situation, the number of firms is not very important.

Question 18

The most significant difference between perfect competition and monopolistic competition is that

Accepted Answer

A)  in a perfectly competitive market products are differentiated, while in a monopolistically competitive market products are homogeneous. 
B)  in a perfectly competitive market products are homogeneous, while in a monopolistically competitive market products are differentiated. 
C)  in a perfectly competitive market there is a large number of sellers, while in a monopolistically competitive market there is a small number of sellers. 
D)  in a perfectly competitive market there is a small number of sellers, while in a monopolistically competitive market there is a large number of sellers. 
A)  in a perfectly competitive market products are differentiated, while in a monopolistically competitive market products are homogeneous. 
B)  in a perfectly competitive market products are homogeneous, while in a monopolistically competitive market products are differentiated. 
C)  in a perfectly competitive market there is a large number of sellers, while in a monopolistically competitive market there is a small number of sellers. 
D)  in a perfectly competitive market there is a small number of sellers, while in a monopolistically competitive market there is a large number of sellers.

Question 19

Which of the following is TRUE for a monopolistically competitive firm?

Accepted Answer

A) MR = P B) MR > P C) MR < P D) MR = AFC A) MR = P B) MR > P C) MR < P D) MR = AFC

Question 20

The goal of advertising is to

Accepted Answer

A)  pay for public broadcasting. 
B)  differentiate a firm's product. 
C)  overwhelm the buyer so they buy a firm's product. 
D)  minimize cost curves for the firm. 
A)  pay for public broadcasting. 
B)  differentiate a firm's product. 
C)  overwhelm the buyer so they buy a firm's product. 
D)  minimize cost curves for the firm.

Exam 25: Monopolistic Competition

For a monopolistic competitive firm, which of the following is true in the long run?

For a firm that sells an information product, the long-run equilibrium exists at a point where

John has just tried on the most comfortable pair of pants that he has ever known. The pants are a(n)

Information products (e.g., software)

Products such as office supplies are examples of

In the long run, what level of economic profits can a monopolistic competitor expect to receive?

If a monopolistically competitive firm selling an information product engages in marginal cost pricing, it will

Which of the following is the long-run outcome for monopolistic competition?

The meaning of interdependence in a monopolistically competitive market is

How does an information product differ from a product such as a desk?

The greater the the number and closeness of substitutes available between monopolistically competitive firms,

-Use the above figure. The profit-maximizing output and price for this monopolistically competitive firm are respectively,

The two economists associated with the development of the theory of monopolistic competition were

-In the above figure, the monopolistically competitive firm's profit-maximizing output is

In the long run, a monopolistic competitor will produce to the point at which

Long-run equilibrium is characterized by zero profits in

Considering the relevant market structures, which is an INCORRECT statement?

The most significant difference between perfect competition and monopolistic competition is that

Which of the following is TRUE for a monopolistically competitive firm?

The goal of advertising is to

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