Question 1

Which of the following short-run outcomes for monopolistic competition is not possible?

Accepted Answer

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

Question 2

Which of the following is a characteristic of monopolistic competition?

Accepted Answer

A)  Few firms 
B)  Homogeneous products 
C)  
A)  Few firms 
B)  Homogeneous products 
C)

Question 3

By promoting its brand name heavily, the monopolistically competitive firm

Accepted Answer

A)  earns more profit in the long run. 
B)  signals its long-term intention to stay in the industry. 
C)  signals its intention to leave the industry. 
D)  guarantees a short run profit. 
A)  earns more profit in the long run. 
B)  signals its long-term intention to stay in the industry. 
C)  signals its intention to leave the industry. 
D)  guarantees a short run profit.

Question 4

For the monopolistic competitor, which of the following is INCORRECT?

Accepted Answer

A)  Because the firm is not a perfect competitor, its demand curve slopes downward. 
B)  The marginal revenue curve is downward sloping and lies below the demand curve. 
C)  The profit-maximizing rate of output arises at the point at which the marginal cost curve intersects the marginal revenue curve. 
D)  If the firm in a monopolistically competitive industry were making economic losses, new firms will enter the industry. 
A)  Because the firm is not a perfect competitor, its demand curve slopes downward. 
B)  The marginal revenue curve is downward sloping and lies below the demand curve. 
C)  The profit-maximizing rate of output arises at the point at which the marginal cost curve intersects the marginal revenue curve. 
D)  If the firm in a monopolistically competitive industry were making economic losses, new firms will enter the industry.

Question 5

The theory of monopolistic competition was developed in two separate models by

Accepted Answer

A)  Adam Smith and David Ricardo. 
B)  John Kenneth Galbraith and John Maynard Keynes. 
C)  Edward Chamberlin and Joan Robinson. 
D)  Roger Leroy Miller and Paul Samuelson. 
A)  Adam Smith and David Ricardo. 
B)  John Kenneth Galbraith and John Maynard Keynes. 
C)  Edward Chamberlin and Joan Robinson. 
D)  Roger Leroy Miller and Paul Samuelson.

Question 6

The demand curve for a monopolistically competitive firm is

Accepted Answer

A)  more elastic than for a perfectly competitive firm. 
B)  more elastic than for a monopoly firm. 
C)  more inelastic than for a monopoly firm. 
D)  the same elasticity as a perfectly competitive firm. 
A)  more elastic than for a perfectly competitive firm. 
B)  more elastic than for a monopoly firm. 
C)  more inelastic than for a monopoly firm. 
D)  the same elasticity as a perfectly competitive firm.

Question 7

When Crest claims that its toothpaste product whitens teeth more than the products of its competitors, Crest is practicing

Accepted Answer

A)  product differentiation. 
B)  libel. 
C)  marginal revenue pricing. 
D)  marginal cost pricing. 
A)  product differentiation. 
B)  libel. 
C)  marginal revenue pricing. 
D)  marginal cost pricing.

Question 8

-In the above figure, when this monopolistically competitive firm produces its profit-maximizing output, it sets a per-unit price of

Accepted Answer

A)  $13. 
B)  $11. 
C)  $10. 
D)  $8. 
A)  $13. 
B)  $11. 
C)  $10. 
D)  $8.

Question 9

Marginal cost for an information product would

Accepted Answer

A)  first decrease and then increase as quantity increases. 
B)  increase constantly as quantity increases. 
C)  decrease constantly as quantity increases. 
D)  remain constant as quantity increases. 
A)  first decrease and then increase as quantity increases. 
B)  increase constantly as quantity increases. 
C)  decrease constantly as quantity increases. 
D)  remain constant as quantity increases.

Question 10

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

Accepted Answer

A)  $12 
B)  $5 
C)  $15 
D)  $6 
A)  $12 
B)  $5 
C)  $15 
D)  $6

Question 11

If monopolistically competitive firms earn short-run economic profits, we expect to see

Accepted Answer

A)  new firms enter the industry, which shifts the demand curves of the existing firms to the left until firms earn zero economic profits. 
B)  new firms trying to enter the industry, but unable to do so because of barriers to entry. 
C)  existing firms altering their scale of plant to try to capture larger profits. The combined effect is to cause all firms to earn zero economic profits. 
D)  existing firms increasing prices to try to capture larger economic profits. 
A)  new firms enter the industry, which shifts the demand curves of the existing firms to the left until firms earn zero economic profits. 
B)  new firms trying to enter the industry, but unable to do so because of barriers to entry. 
C)  existing firms altering their scale of plant to try to capture larger profits. The combined effect is to cause all firms to earn zero economic profits. 
D)  existing firms increasing prices to try to capture larger economic profits.

Question 12

-The above figure shows the situation of a monopolistic competitor in the short run. The maximum economic profits of the firm equal

Accepted Answer

A)  $50,000. 
B)  $30,000. 
C)  15,000. 
D)  zero. 
A)  $50,000. 
B)  $30,000. 
C)  15,000. 
D)  zero.

Question 13

Because of product differentiation in a monopolistically competitive market, the demand curve for an individual firm will be

Accepted Answer

A)  horizontal. 
B)  vertical. 
C)  downward sloping. 
D)  upward sloping. 
A)  horizontal. 
B)  vertical. 
C)  downward sloping. 
D)  upward sloping.

Question 14

Which of the following is NOT a feature of a monopolistically competitive market?

Accepted Answer

A)  numerous buyers and sellers 
B)  differentiated products 
C)  advertising 
D)  a homogeneous product 
A)  numerous buyers and sellers 
B)  differentiated products 
C)  advertising 
D)  a homogeneous product

Question 15

Which of the following statements about a monopolistically competitive firm is FALSE?

Accepted Answer

A)  It tries to differentiate its product from that of competitors. 
B)  It may earn short-run economic profits. 
C)  It produces the quantity at which MC=MR. 
D)  It sets price like a perfectly competitive firm. 
A)  It tries to differentiate its product from that of competitors. 
B)  It may earn short-run economic profits. 
C)  It produces the quantity at which MC=MR. 
D)  It sets price like a perfectly competitive firm.

Question 16

-Refer to the above figure. This firm is operating in the

Accepted Answer

A)  long run since economic profits are greater than zero. 
B)  long run since economic profits are less than zero. 
C)  short run since economic profits are greater than zero. 
D)  short run since economic profits are less than zero. 
A)  long run since economic profits are greater than zero. 
B)  long run since economic profits are less than zero. 
C)  short run since economic profits are greater than zero. 
D)  short run since economic profits are less than zero.

Question 17

The monopolistic competitive firm in short-run equilibrium may experience economic profits that are

Accepted Answer

A)  always zero. 
B)  greater than, equal to, or less than zero. 
C)  always positive. 
D)  always negative. 
A)  always zero. 
B)  greater than, equal to, or less than zero. 
C)  always positive. 
D)  always negative.

Question 18

In a monopolistically competitive market, entry into the industry

Accepted Answer

A)  is relatively easy. 
B)  is blocked. 
C)  is difficult due to extensive government regulation. 
D)  is as difficult as entry into a monopoly. 
A)  is relatively easy. 
B)  is blocked. 
C)  is difficult due to extensive government regulation. 
D)  is as difficult as entry into a monopoly.

Question 19

In which industry structure is advertising and sales promotion likely to be most important?

Accepted Answer

A)  Perfect competition 
B)  Monopoly 
C)  Monopolistic competition 
D)  All of the above are equally reliant on effective advertising and promotion 
A)  Perfect competition 
B)  Monopoly 
C)  Monopolistic competition 
D)  All of the above are equally reliant on effective advertising and promotion

Question 20

Persuasive advertising is the type of advertising that

Accepted Answer

A)  is used exclusively on television. 
B)  is used exclusively on radio. 
C)  emphasizes the features of its product. 
D)  is used to induce a consumer to discover previously unknown tastes and preferences. 
A)  is used exclusively on television. 
B)  is used exclusively on radio. 
C)  emphasizes the features of its product. 
D)  is used to induce a consumer to discover previously unknown tastes and preferences.

Exam 25: Monopolistic Competition

Which of the following short-run outcomes for monopolistic competition is not possible?

Which of the following is a characteristic of monopolistic competition?

By promoting its brand name heavily, the monopolistically competitive firm

For the monopolistic competitor, which of the following is INCORRECT?

The theory of monopolistic competition was developed in two separate models by

The demand curve for a monopolistically competitive firm is

When Crest claims that its toothpaste product whitens teeth more than the products of its competitors, Crest is practicing

-In the above figure, when this monopolistically competitive firm produces its profit-maximizing output, it sets a per-unit price of

Marginal cost for an information product would

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

If monopolistically competitive firms earn short-run economic profits, we expect to see

-The above figure shows the situation of a monopolistic competitor in the short run. The maximum economic profits of the firm equal

Because of product differentiation in a monopolistically competitive market, the demand curve for an individual firm will be

Which of the following is NOT a feature of a monopolistically competitive market?

Which of the following statements about a monopolistically competitive firm is FALSE?

-Refer to the above figure. This firm is operating in the

The monopolistic competitive firm in short-run equilibrium may experience economic profits that are

In a monopolistically competitive market, entry into the industry

In which industry structure is advertising and sales promotion likely to be most important?

Persuasive advertising is the type of advertising that

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