Question 1

Monopolistic competition is a market structure characterized by many small firms selling a homogeneous product.

Accepted Answer

A) True 
 B)False

Question 2

Exhibit 14-5 The graph depicts a monopolistically competitive firm's demand,marginal revenue,and cost curves.   Refer to Exhibit 14-5.To maximize profit (or minimize losses),the firm will charge:

Accepted Answer

A)  $38 per sweater. 
B)  $44 per sweater. 
C)  $50 per sweater. 
D)  $56 per sweater. 
A)  $38 per sweater. 
B)  $44 per sweater. 
C)  $50 per sweater. 
D)  $56 per sweater.

Question 3

Monopolistically competitive industries have significant barriers to entry and exit.

Accepted Answer

A) True 
 B)False

Question 4

Exhibit 14-3 The following diagrams depict firms in monopolistically competitive markets.   Refer to Exhibit 14-3.Graph ____ demonstrates firms entering the market,and a resulting ____ of the firm's share of the market.

Accepted Answer

A)  A; increase 
B)  B; increase 
C)  A; decrease 
D)  B; decrease 
A)  A; increase 
B)  B; increase 
C)  A; decrease 
D)  B; decrease

Question 5

Monopolistically competitive sellers have some ability to influence the price of their products.

Accepted Answer

A) True 
 B)False

Question 6

Which of the following does not happen when new firms enter a monopolistically competitive industry?

Accepted Answer

A)  The demand curve for each of the existing firms will fall. 
B)  The demand curve for each of the existing firms will move inward. 
C)  The demand curve for each of the existing firms will becomes relatively more elastic. 
D)  The demand curve for each of the existing firms will shift to the right. 
A)  The demand curve for each of the existing firms will fall. 
B)  The demand curve for each of the existing firms will move inward. 
C)  The demand curve for each of the existing firms will becomes relatively more elastic. 
D)  The demand curve for each of the existing firms will shift to the right.

Question 7

A monopolistically competitive firm operates on the ____ of their average total cost curve,where marginal cost is ____ average total cost.

Accepted Answer

A)  declining portion; above 
B)  rising portion; above 
C)  rising portion; below 
D)  declining portion; below 
A)  declining portion; above 
B)  rising portion; above 
C)  rising portion; below 
D)  declining portion; below

Question 8

In the long run,a monopolistic competitor's price will equal:

Accepted Answer

A)  marginal revenue. 
B)  average total cost. 
C)  marginal cost. 
D)  minimum average total cost. 
A)  marginal revenue. 
B)  average total cost. 
C)  marginal cost. 
D)  minimum average total cost.

Question 9

The "demonstration effect" created by advertising:

Accepted Answer

A)  manipulates consumer needs for trivial products. 
B)  creates urges among consumers to buy products previously unknown to them. 
C)  conveys misleading claims to the consumer. 
D)  none of the above 
A)  manipulates consumer needs for trivial products. 
B)  creates urges among consumers to buy products previously unknown to them. 
C)  conveys misleading claims to the consumer. 
D)  none of the above

Question 10

Which of the following is not true of long run equilibrium under monopolistic competition?

Accepted Answer

A)  Price equals marginal cost. 
B)  Price equals average cost. 
C)  Price equals minimum average total cost. 
D)  None of the above. 
A)  Price equals marginal cost. 
B)  Price equals average cost. 
C)  Price equals minimum average total cost. 
D)  None of the above.

Question 11

When firms enter a monopolistically competitive market:

Accepted Answer

A)  product variety diminishes. 
B)  the demand curves of established firms shift to the right. 
C)  prices fall. 
D)  profits increase. 
A)  product variety diminishes. 
B)  the demand curves of established firms shift to the right. 
C)  prices fall. 
D)  profits increase.

Question 12

In most areas,there are a large number of qualified primary care physicians whose services are highly personalized.In addition to price,factors such as age,sex,location,and personality influence the choice of physician.The primary care physician market is probably:

Accepted Answer

A)  perfectly competitive. 
B)  oligopolistic. 
C)  monopolistic. 
D)  monopolistically competitive. 
A)  perfectly competitive. 
B)  oligopolistic. 
C)  monopolistic. 
D)  monopolistically competitive.

Question 13

Which of the following characteristics apply to both monopoly and monopolistic competition?

Accepted Answer

A)  Marginal revenue exceeds marginal cost at equilibrium. 
B)  Average revenue exceeds both marginal cost and marginal revenue at equilibrium. 
C)  Marginal revenue exceeds average revenue at equilibrium. 
D)  Marginal revenue and marginal cost are equal and exceed price at equilibrium. 
A)  Marginal revenue exceeds marginal cost at equilibrium. 
B)  Average revenue exceeds both marginal cost and marginal revenue at equilibrium. 
C)  Marginal revenue exceeds average revenue at equilibrium. 
D)  Marginal revenue and marginal cost are equal and exceed price at equilibrium.

Question 14

Exhibit 14-2 The following diagram depicts monopolistically competitive firms.   Refer to Exhibit 14-2.In Graph B,the profit-maximizing (loss-minimizing)firm is making a ____ shown by the area ____.

Accepted Answer

A)  profit; P1 V R S 
B)  loss; P2 P1 S T 
C)  profit; P2 P1 S T 
D)  loss; P1 V R S 
A)  profit; P1 V R S 
B)  loss; P2 P1 S T 
C)  profit; P2 P1 S T 
D)  loss; P1 V R S

Question 15

Monopolistic competitors and perfect competitors are alike in:

Accepted Answer

A)  facing horizontal demand curves. 
B)  earning zero economic profit in the short run. 
C)  earning zero economic profit in the long run. 
D)  relying on advertising to attract buyers to their products. 
A)  facing horizontal demand curves. 
B)  earning zero economic profit in the short run. 
C)  earning zero economic profit in the long run. 
D)  relying on advertising to attract buyers to their products.

Question 16

In the long run,a monopolistic competitor:

Accepted Answer

A)  earns a normal rate of return. 
B)  sells a level of output at which marginal revenue is less than price. 
C)  sells a level of output at which marginal revenue equals marginal cost. 
D)  is characterized by all of the above. 
A)  earns a normal rate of return. 
B)  sells a level of output at which marginal revenue is less than price. 
C)  sells a level of output at which marginal revenue equals marginal cost. 
D)  is characterized by all of the above.

Question 17

Which of the following is characteristic of monopolistically competitive industries?

Accepted Answer

A)  Product differentiation. 
B)  A substantial likelihood of collusion. 
C)  Relatively small market shares of each producer. 
D)  Both (a) and (c) are characteristics of monopolistically competitive industries. 
A)  Product differentiation. 
B)  A substantial likelihood of collusion. 
C)  Relatively small market shares of each producer. 
D)  Both (a) and (c) are characteristics of monopolistically competitive industries.

Question 18

Advertising:

Accepted Answer

A)  cannot influence market demand. 
B)  shifts the average total cost curve upward. 
C)  is used only by perfectly competitive firms. 
D)  makes demand more elastic by creating customer loyalty. 
A)  cannot influence market demand. 
B)  shifts the average total cost curve upward. 
C)  is used only by perfectly competitive firms. 
D)  makes demand more elastic by creating customer loyalty.

Question 19

Exhibit 14-2 The following diagram depicts monopolistically competitive firms.   Refer to Exhibit 14-2.In Graph B above,the firm will maximize profits (minimize losses)by producing at level of output ____ and charging price ____.

Accepted Answer

A)  q1; P1 
B)  q2; P1 
C)  q1; P2 
D)  q2; P2 
A)  q1; P1 
B)  q2; P1 
C)  q1; P2 
D)  q2; P2

Question 20

If toothpaste manufacturers compete in a monopolistically competitive market,then:

Accepted Answer

A)  firms are price takers. 
B)  firms try to differentiate their products from those of competitors. 
C)  firms maximize profits by choosing output where price equals marginal cost. 
D)  there are significant barriers to entering the toothpaste industry. 
A)  firms are price takers. 
B)  firms try to differentiate their products from those of competitors. 
C)  firms maximize profits by choosing output where price equals marginal cost. 
D)  there are significant barriers to entering the toothpaste industry.

Exam 14: Monopolistic Competition and Product Differentiation

Monopolistic competition is a market structure characterized by many small firms selling a homogeneous product.

Exhibit 14-5 The graph depicts a monopolistically competitive firm's demand,marginal revenue,and cost curves. Refer to Exhibit 14-5.To maximize profit (or minimize losses),the firm will charge:

Monopolistically competitive industries have significant barriers to entry and exit.

Exhibit 14-3 The following diagrams depict firms in monopolistically competitive markets. Refer to Exhibit 14-3.Graph ____ demonstrates firms entering the market,and a resulting ____ of the firm's share of the market.

Monopolistically competitive sellers have some ability to influence the price of their products.

Which of the following does not happen when new firms enter a monopolistically competitive industry?

A monopolistically competitive firm operates on the ____ of their average total cost curve,where marginal cost is ____ average total cost.

In the long run,a monopolistic competitor's price will equal:

The "demonstration effect" created by advertising:

Which of the following is not true of long run equilibrium under monopolistic competition?

When firms enter a monopolistically competitive market:

In most areas,there are a large number of qualified primary care physicians whose services are highly personalized.In addition to price,factors such as age,sex,location,and personality influence the choice of physician.The primary care physician market is probably:

Which of the following characteristics apply to both monopoly and monopolistic competition?

Exhibit 14-2 The following diagram depicts monopolistically competitive firms. Refer to Exhibit 14-2.In Graph B,the profit-maximizing (loss-minimizing)firm is making a ____ shown by the area ____.

Monopolistic competitors and perfect competitors are alike in:

In the long run,a monopolistic competitor:

Which of the following is characteristic of monopolistically competitive industries?

Advertising:

Exhibit 14-2 The following diagram depicts monopolistically competitive firms. Refer to Exhibit 14-2.In Graph B above,the firm will maximize profits (minimize losses)by producing at level of output ____ and charging price ____.

If toothpaste manufacturers compete in a monopolistically competitive market,then:

The Role and Method of Economics

Economics: Eight Powerful Ideas

Scarcity, Trade-Offs, and Production Possibilities

Demand, Supply, and Market Equilibrium

Markets in Motion and Price Controls

Elasticities

Market Efficiency and Welfare

Market Failure

Public Finance and Public Choice

Consumer Choice Theory

The Firm: Production and Costs

Firms in Perfectly Competitive Markets

Monopoly and Antitrust

Oligopoly and Strategic Behavior

The Markets for Labor, Capital, and Land

Income, Poverty, and Health Care

Introduction to Macroeconomics: Unemployment, Inflation, and Economic Fluctuations

Measuring Economic Performance

Economic Growth in the Global Economy

Financial Markets, Saving, and Investment

Aggregate Demand and Aggregate Supply

The Aggregate Expenditure Model

Monetary Institutions

The Federal Reserve System and Monetary Policy

Issues in Macroeconomic Theory and Policy

International Trade

International Finance

Filters

Exhibit 14-3 The following diagrams depict firms in monopolistically competitive markets. Refer to Exhibit 14-3.Graph demonstrates firms entering the market,and a resulting of the firm's share of the market.

A monopolistically competitive firm operates on the of their average total cost curve,where marginal cost is average total cost.

Exhibit 14-2 The following diagram depicts monopolistically competitive firms. Refer to Exhibit 14-2.In Graph B,the profit-maximizing (loss-minimizing)firm is making a shown by the area .

Exhibit 14-2 The following diagram depicts monopolistically competitive firms. Refer to Exhibit 14-2.In Graph B above,the firm will maximize profits (minimize losses)by producing at level of output and charging price .