Question 1

When a firm relies on radio and TV ads to reach potential customers, the firm is engaging in

Accepted Answer

A)  direct marketing. 
B)  mass marketing. 
C)  interactive marketing. 
D)  none of the above. 
A)  direct marketing. 
B)  mass marketing. 
C)  interactive marketing. 
D)  none of the above.

Question 2

Compared with a perfectly competitive firm facing the same costs, long-run equilibrium for a monopolistically competitive firm will result in

Accepted Answer

A)  a higher price and greater output. 
B)  a lower price and less output. 
C)  a higher price and less output. 
D)  a lower price and greater output. 
A)  a higher price and greater output. 
B)  a lower price and less output. 
C)  a higher price and less output. 
D)  a lower price and greater output.

Question 3

Advertising is used by firms in a monopolistic competitive industry to

Accepted Answer

A)  differentiate their product from those of competitors. 
B)  increase brand loyalty. 
C)  increase demands for their individual products. 
D)  all of the above 
A)  differentiate their product from those of competitors. 
B)  increase brand loyalty. 
C)  increase demands for their individual products. 
D)  all of the above

Question 4

A good example of a monopolistic competitive industry is

Accepted Answer

A)  the U.S. auto industry. 
B)  the public utility industry. 
C)  the computer game industry. 
D)  mining. 
A)  the U.S. auto industry. 
B)  the public utility industry. 
C)  the computer game industry. 
D)  mining.

Question 5

According to Chamberlin, the fact that in the long run average total cost exceeds its minimum value under monopolistic competition is

Accepted Answer

A)  the social cost of monopolistic competition. 
B)  the most important reason for why monopolistic competition is not efficient. 
C)  part of the cost of producing different products for consumers. 
D)  actually beneficial because it makes adjustments easier when demand increases. 
A)  the social cost of monopolistic competition. 
B)  the most important reason for why monopolistic competition is not efficient. 
C)  part of the cost of producing different products for consumers. 
D)  actually beneficial because it makes adjustments easier when demand increases.

Question 6

The brand name of a firm

Accepted Answer

A)  has nothing to do with the profitability of a firm. 
B)  has been considered irrelevant by economists since profits for a monopolistic competitive firm are zero in the long-run. 
C)  relates to consumers' perception of product differentiation and to the market value of a firm. 
D)  is important in the short-run but not in the long-run. 
A)  has nothing to do with the profitability of a firm. 
B)  has been considered irrelevant by economists since profits for a monopolistic competitive firm are zero in the long-run. 
C)  relates to consumers' perception of product differentiation and to the market value of a firm. 
D)  is important in the short-run but not in the long-run.

Question 7

The products sold by monopolistically competitive firms

Accepted Answer

A)  are differentiated. 
B)  are homogeneous. 
C)  can be either homogeneous or differentiated. 
D)  are close substitutes of each other. 
A)  are differentiated. 
B)  are homogeneous. 
C)  can be either homogeneous or differentiated. 
D)  are close substitutes of each other.

Question 8

Compared to perfect competition, a monopolistically competitive market will produce ________ output and charge a ________ price.

Accepted Answer

A)  more; higher 
B)  more; lower 
C)  less; higher 
D)  less; lower 
A)  more; higher 
B)  more; lower 
C)  less; higher 
D)  less; lower

Question 9

-Refer to the above figure. Economic profits for this firm are

Accepted Answer

A)  negative and equal to   bc   . 
B)  negative and equal to   bc   . 
C)  positive and equal to   bc   . 
D)  positive and equal to   ab   . 
A)  negative and equal to   bc   . 
B)  negative and equal to   bc   . 
C)  positive and equal to   bc   . 
D)  positive and equal to   ab   .

Question 10

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

Accepted Answer

A)  Product differentiation 
B)  Barriers to entry into the market 
C)  Advertising 
D)  A significant number of sellers 
A)  Product differentiation 
B)  Barriers to entry into the market 
C)  Advertising 
D)  A significant number of sellers

Question 11

Advertising intended to reach as many consumers as possible, typically through television, newspaper, or magazine ads is referred to as

Accepted Answer

A)  interactive advertising. 
B)  direct marketing. 
C)  mass marketing. 
D)  subliminal advertising. 
A)  interactive advertising. 
B)  direct marketing. 
C)  mass marketing. 
D)  subliminal advertising.

Question 12

The long-run equilibrium of a monopolistic competitor differs from the long-run equilibrium of a perfect competitor in that

Accepted Answer

A)  the monopolistic competitor makes economic profits. 
B)  the monopolistic competitor sets price equal to marginal cost. 
C)  the monopolistic competitor produces at the minimum point of its average total cost curve. 
D)  the monopolistic competitor charges a price that exceeds marginal cost. 
A)  the monopolistic competitor makes economic profits. 
B)  the monopolistic competitor sets price equal to marginal cost. 
C)  the monopolistic competitor produces at the minimum point of its average total cost curve. 
D)  the monopolistic competitor charges a price that exceeds marginal cost.

Question 13

Personalized advertising that uses postal mailings, phone calls, and e-mail messages is known as

Accepted Answer

A)  direct marketing. 
B)  mass marketing. 
C)  indirect marketing. 
D)  interactive marketing. 
A)  direct marketing. 
B)  mass marketing. 
C)  indirect marketing. 
D)  interactive marketing.

Question 14

-Refer to the above figure. Which panel does not represent a possible short-run situation for a monopolistically competitive firm?

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 15

In the long run, monopolistically competitive firms will not earn economic profits because

Accepted Answer

A)  average total cost will shift up to meet the demand curve. 
B)  input prices will be bid up. 
C)  production will not be at minimum average cost. 
D)  new firms will enter the industry. 
A)  average total cost will shift up to meet the demand curve. 
B)  input prices will be bid up. 
C)  production will not be at minimum average cost. 
D)  new firms will enter the industry.

Question 16

In the long run, the price of information products in monopolistically competitive markets will be equal to

Accepted Answer

A)  AVC. 
B)  MC. 
C)  AFC. 
D)  ATC. 
A)  AVC. 
B)  MC. 
C)  AFC. 
D)  ATC.

Question 17

When you see a preview of a coming movie at the movie theater, this is

Accepted Answer

A)  informational advertising. 
B)  direct market advertising. 
C)  indirect market advertising. 
D)  persuasive advertising. 
A)  informational advertising. 
B)  direct market advertising. 
C)  indirect market advertising. 
D)  persuasive advertising.

Question 18

For a monopolistically competitive market, the number of firms in the market implies that

Accepted Answer

A)  each firm faces a perfectly elastic demand. 
B)  all firms will make losses. 
C)  each firm acts independently of other firms. 
D)  firms will collude to set monopoly price and output. 
A)  each firm faces a perfectly elastic demand. 
B)  all firms will make losses. 
C)  each firm acts independently of other firms. 
D)  firms will collude to set monopoly price and output.

Question 19

A firm in a monopolistically competitive market determines the profit-maximizing output at which

Accepted Answer

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

Question 20

-Use the above figure. The profit-maximizing monopolistically competitive firm

Accepted Answer

A)  is losing $0.05 per unit of output. 
B)  is earning $0.40 per unit of output. 
C)  is earning $0.15 per unit of output. 
D)  is earning $0.05 per unit of output. 
A)  is losing $0.05 per unit of output. 
B)  is earning $0.40 per unit of output. 
C)  is earning $0.15 per unit of output. 
D)  is earning $0.05 per unit of output.

Exam 25: Monopolistic Competition

When a firm relies on radio and TV ads to reach potential customers, the firm is engaging in

Compared with a perfectly competitive firm facing the same costs, long-run equilibrium for a monopolistically competitive firm will result in

Advertising is used by firms in a monopolistic competitive industry to

A good example of a monopolistic competitive industry is

According to Chamberlin, the fact that in the long run average total cost exceeds its minimum value under monopolistic competition is

The brand name of a firm

The products sold by monopolistically competitive firms

Compared to perfect competition, a monopolistically competitive market will produce ________ output and charge a ________ price.

-Refer to the above figure. Economic profits for this firm are

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

Advertising intended to reach as many consumers as possible, typically through television, newspaper, or magazine ads is referred to as

The long-run equilibrium of a monopolistic competitor differs from the long-run equilibrium of a perfect competitor in that

Personalized advertising that uses postal mailings, phone calls, and e-mail messages is known as

-Refer to the above figure. Which panel does not represent a possible short-run situation for a monopolistically competitive firm?

In the long run, monopolistically competitive firms will not earn economic profits because

In the long run, the price of information products in monopolistically competitive markets will be equal to

When you see a preview of a coming movie at the movie theater, this is

For a monopolistically competitive market, the number of firms in the market implies that

A firm in a monopolistically competitive market determines the profit-maximizing output at which

-Use the above figure. The profit-maximizing monopolistically competitive firm

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

Compared to perfect competition, a monopolistically competitive market will produce output and charge a price.