Question 1

A search 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 2

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

Accepted Answer

A)  $2,560. 
B)  $1,600. 
C)  $480. 
D)  $1,900. 
A)  $2,560. 
B)  $1,600. 
C)  $480. 
D)  $1,900.

Question 3

Interactive marketing is

Accepted Answer

A)  advertising that permits a consumer to follow up directly by searching for more information and placing direct product orders. 
B)  advertising that targets a specific audience and allows the consumer to follow up directly by placing direct product orders usually through television or radio. 
C)  advertising targeted at specific consumers. 
D)  advertising intended to reach as many consumers as possible. 
A)  advertising that permits a consumer to follow up directly by searching for more information and placing direct product orders. 
B)  advertising that targets a specific audience and allows the consumer to follow up directly by placing direct product orders usually through television or radio. 
C)  advertising targeted at specific consumers. 
D)  advertising intended to reach as many consumers as possible.

Question 4

-Use the above figure. The economic profit for this firm is

Accepted Answer

A)  zero. 
B)  the distance between T and E. 
C)  the distance between E and x-axis. 
D)  the distance between T and x-axis. 
A)  zero. 
B)  the distance between T and E. 
C)  the distance between E and x-axis. 
D)  the distance between T and x-axis.

Question 5

Explain the difference between informational advertising and persuasive advertising. Give an example of a product that would be the subject of each type of advertising and explain why that type of advertising fits the product.

Accepted Answer

Informational advertising explains the f

Question 6

Mass marketing involves

Accepted Answer

A)  using all types of media, such as television and radio, to reach as many consumers as possible. 
B)  internet ads only. 
C)  using direct mailings only. 
D)  lower-cost methods of advertising. 
A)  using all types of media, such as television and radio, to reach as many consumers as possible. 
B)  internet ads only. 
C)  using direct mailings only. 
D)  lower-cost methods of advertising.

Question 7

The demand curve faced by a monopolistically competitive firms is

Accepted Answer

A)  horizontal. 
B)  vertical. 
C)  downward sloping. 
D)  unitary elastic. 
A)  horizontal. 
B)  vertical. 
C)  downward sloping. 
D)  unitary elastic.

Question 8

Which statement is INCORRECT with respect to sales promotion and advertising?

Accepted Answer

A)  Perfect competition differs from monopolistic competition in that no individual firm in a perfectly competitive market will advertise. 
B)  A perfectly competitive firm, by definition, can sell all that it wants to sell at the going market price. 
C)  A perfect competitor advertises a product that is different from the products that all other firms in the industry are selling. 
D)  Advertising should be carried to the point at which the additional revenue from one more dollar of advertising just equals that one dollar of marginal cost. 
A)  Perfect competition differs from monopolistic competition in that no individual firm in a perfectly competitive market will advertise. 
B)  A perfectly competitive firm, by definition, can sell all that it wants to sell at the going market price. 
C)  A perfect competitor advertises a product that is different from the products that all other firms in the industry are selling. 
D)  Advertising should be carried to the point at which the additional revenue from one more dollar of advertising just equals that one dollar of marginal cost.

Question 9

-In the above figure, what would happen to the monopolistically competitive industry in the long run?

Accepted Answer

A)  More producers would enter the market, and the share of the market to this firm would fall, which would cause the demand curve to shift leftward until there is zero economic profit. 
B)  More producers would exit the market, and the share of the market to this firm would fall, which would cause the demand curve to shift leftward until there is zero economic profit. 
C)  More producers would enter the market, and the share of the market to this firm would rise, which would cause the demand curve to shift rightward until there is zero economic profit. 
D)  More producers would enter the market, and the share of the market to this firm would fall, which would cause the demand curve to shift leftward until there is negative economic profit. 
A)  More producers would enter the market, and the share of the market to this firm would fall, which would cause the demand curve to shift leftward until there is zero economic profit. 
B)  More producers would exit the market, and the share of the market to this firm would fall, which would cause the demand curve to shift leftward until there is zero economic profit. 
C)  More producers would enter the market, and the share of the market to this firm would rise, which would cause the demand curve to shift rightward until there is zero economic profit. 
D)  More producers would enter the market, and the share of the market to this firm would fall, which would cause the demand curve to shift leftward until there is negative economic profit.

Question 10

Persuasive advertising is mostly used for

Accepted Answer

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

Question 11

-Use the above figure. The total cost of producing at the optimal level for the monopolistically competitive firm is

Accepted Answer

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

Question 12

Firms that sell information products experience relatively high fixed costs but, once they have produced the first unit, can

Accepted Answer

A)  sell additional units at a loss, or above cost. 
B)  provide expensive information products to consumers. 
C)  sell additional units at a relatively low cost per unit. 
D)  experience short-run diseconomies of scale. 
A)  sell additional units at a loss, or above cost. 
B)  provide expensive information products to consumers. 
C)  sell additional units at a relatively low cost per unit. 
D)  experience short-run diseconomies of scale.

Question 13

-The above table depicts prices, quantities, and marginal costs faced by the campus bookstore. At the profit-maximizing level of output, what is the profit earned by the store?

Accepted Answer

A)  $15 
B)  $6 
C)  $8 
D)  $0 
A)  $15 
B)  $6 
C)  $8 
D)  $0

Question 14

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

Accepted Answer

A)  $2,560. 
B)  $1,600. 
C)  $480. 
D)  $1,900. 
A)  $2,560. 
B)  $1,600. 
C)  $480. 
D)  $1,900.

Question 15

The goal of advertising is to

Accepted Answer

A)  increase the price elasticity of demand for the firm's product. 
B)  reduce the price elasticity of demand for the firm's product. 
C)  increase the standardization of the industry. 
D)  encourage firms to enter into the industry. 
A)  increase the price elasticity of demand for the firm's product. 
B)  reduce the price elasticity of demand for the firm's product. 
C)  increase the standardization of the industry. 
D)  encourage firms to enter into the industry.

Question 16

An experience 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 17

-Refer to the above figure. A long-run equilibrium in monopolistic competition is pictured by

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 18

Which of the following is most likely to be the subject of informational advertising?

Accepted Answer

A)  a search good 
B)  a credible good 
C)  an experience good 
D)  an inexperience good 
A)  a search good 
B)  a credible good 
C)  an experience good 
D)  an inexperience good

Question 19

The demand curve for the product of a monopolistically competitive firm slopes downward because

Accepted Answer

A)  products are perceived by consumers as different. 
B)  products are homogeneous. 
C)  people only care about price when they buy a good. 
D)  the firm's goal is to maximize profits. 
A)  products are perceived by consumers as different. 
B)  products are homogeneous. 
C)  people only care about price when they buy a good. 
D)  the firm's goal is to maximize profits.

Question 20

In the short run, the profit-maximizing monopolistically competitive firm will produce the rate of output at which

Accepted Answer

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

Exam 25: Monopolistic Competition

A search good is a product

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

Interactive marketing is

-Use the above figure. The economic profit for this firm is

Explain the difference between informational advertising and persuasive advertising. Give an example of a product that would be the subject of each type of advertising and explain why that type of advertising fits the product.

Mass marketing involves

The demand curve faced by a monopolistically competitive firms is

Which statement is INCORRECT with respect to sales promotion and advertising?

-In the above figure, what would happen to the monopolistically competitive industry in the long run?

Persuasive advertising is mostly used for

-Use the above figure. The total cost of producing at the optimal level for the monopolistically competitive firm is

Firms that sell information products experience relatively high fixed costs but, once they have produced the first unit, can

-The above table depicts prices, quantities, and marginal costs faced by the campus bookstore. At the profit-maximizing level of output, what is the profit earned by the store?

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

The goal of advertising is to

An experience good is a product

-Refer to the above figure. A long-run equilibrium in monopolistic competition is pictured by

Which of the following is most likely to be the subject of informational advertising?

The demand curve for the product of a monopolistically competitive firm slopes downward because

In the short run, the profit-maximizing monopolistically competitive firm will produce the rate of output at which

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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