Question 1

If the firm in the graph below represents the typical firm in a monopolistically competitive industry,what would be most likely to occur?

Accepted Answer

A)  New firms would be likely to enter this industry. 
B)  Existing firms would be likely to exit this industry. 
C)  Firms would neither enter nor exit this industry. 
D)  New firms would like to enter but since there are substantial barriers to entry they cannot do so. 
A)  New firms would be likely to enter this industry. 
B)  Existing firms would be likely to exit this industry. 
C)  Firms would neither enter nor exit this industry. 
D)  New firms would like to enter but since there are substantial barriers to entry they cannot do so.

Question 2

Exhibit 14-5 The graph depicts a monopolistically competitive firm's demand,marginal revenue,and cost curves.   Refer to Exhibit 14-5.The monopolistically competitive firm depicted is:

Accepted Answer

A)  operating in the short run. 
B)  operating in the long run. 
C)  operating either in the short-run or the long-run period. 
D)  earning an above normal profit. 
A)  operating in the short run. 
B)  operating in the long run. 
C)  operating either in the short-run or the long-run period. 
D)  earning an above normal profit.

Question 3

Critics of advertising make which of the following claims about advertising?
i.It often creates "needs" for trivial products.
ii.It manipulates people's tastes.
iii.It uses scarce resources and raises costs.

Accepted Answer

A)  (i) and (ii) only 
B)  (i) only 
C)  (ii) only 
D)  (i), (ii), and (iii). 
A)  (i) and (ii) only 
B)  (i) only 
C)  (ii) only 
D)  (i), (ii), and (iii).

Question 4

In monopolistically competitive market structure,because each good sold in the market is ____,each firm is considered a ____.

Accepted Answer

A)  slightly different; price maker 
B)  slightly different; price taker 
C)  the same; price maker 
D)  the same; price taker 
A)  slightly different; price maker 
B)  slightly different; price taker 
C)  the same; price maker 
D)  the same; price taker

Question 5

Define monopolistic competition.

Accepted Answer

Monopolistic competition is a market str

Question 6

If firms in a monopolistically competitive industry are making economic profits:

Accepted Answer

A)  firms will likely be subject to regulation. 
B)  barriers to entry will be strengthened. 
C)  new firms will enter the market. 
D)  some firms must exit the market. 
A)  firms will likely be subject to regulation. 
B)  barriers to entry will be strengthened. 
C)  new firms will enter the market. 
D)  some firms must exit the market.

Question 7

When marketing makes customers better informed about all firms in the market:

Accepted Answer

A)  demand curves for specific brands in the market are likely to become less elastic. 
B)  each firm is likely to have less market power. 
C)  firms are better able to foster stronger brand loyalty. 
D)  the market power of individual firms is strengthened. 
A)  demand curves for specific brands in the market are likely to become less elastic. 
B)  each firm is likely to have less market power. 
C)  firms are better able to foster stronger brand loyalty. 
D)  the market power of individual firms is strengthened.

Question 8

The market structure(s)most likely to exhibit extensive advertising is (are):

Accepted Answer

A)  monopoly. 
B)  monopolistic competition. 
C)  perfect competition. 
D)  monopoly and oligopoly. 
A)  monopoly. 
B)  monopolistic competition. 
C)  perfect competition. 
D)  monopoly and oligopoly.

Question 9

Monopolistic competition is similar to monopoly in that:

Accepted Answer

A)  firms face perfectly elastic demand curves. 
B)  firms sell products for which there are no close substitutes. 
C)  there is relatively free entry and exit. 
D)  firms have some influence over the product price. 
A)  firms face perfectly elastic demand curves. 
B)  firms sell products for which there are no close substitutes. 
C)  there is relatively free entry and exit. 
D)  firms have some influence over the product price.

Question 10

Exhibit 14-4 The following diagram depicts firms in monopolistically competitive markets.   Refer to Exhibit 14-4.The extent of excess capacity of this firm is:

Accepted Answer

A)  11,000 pairs of blue jeans. 
B)  7,000 pairs of blue jeans. 
C)  4,000 pairs of blue jeans. 
D)  1,000 pairs of blue jeans. 
A)  11,000 pairs of blue jeans. 
B)  7,000 pairs of blue jeans. 
C)  4,000 pairs of blue jeans. 
D)  1,000 pairs of blue jeans.

Question 11

In equilibrium under monopolistic competition:

Accepted Answer

A)  firms always earn profits in the short run. 
B)  firms always suffer losses in the short run. 
C)  output is at the socially efficient level in the long run. 
D)  marginal revenue is less than price. 
A)  firms always earn profits in the short run. 
B)  firms always suffer losses in the short run. 
C)  output is at the socially efficient level in the long run. 
D)  marginal revenue is less than price.

Question 12

Monopolistic competition is characterized by:

Accepted Answer

A)  a small number of firms selling differentiated products. 
B)  a large number of firms selling identical products. 
C)  high barriers to entry. 
D)  a large number of firms selling differentiated products. 
A)  a small number of firms selling differentiated products. 
B)  a large number of firms selling identical products. 
C)  high barriers to entry. 
D)  a large number of firms selling differentiated products.

Question 13

Although there are certain inefficiencies associated with monopolistic competition,society receives a benefit from monopolistic competition in the form of product variety.

Accepted Answer

A) True 
 B)False

Question 14

In the long run,monopolistically competitive firms typically produce with allocative efficiency.

Accepted Answer

A) True 
 B)False

Question 15

Under monopolistic competition:

Accepted Answer

A)  there are significant barriers to entry. 
B)  there are few barriers to entry. 
C)  firms sell identical products. 
D)  firms face perfectly elastic demand curves. 
A)  there are significant barriers to entry. 
B)  there are few barriers to entry. 
C)  firms sell identical products. 
D)  firms face perfectly elastic demand curves.

Question 16

Explain how economic profits are reduced to zero as new firms enter a monopolistically competitive industry.

Accepted Answer

Influx of new sellers means that each ne

Question 17

Exhibit 14-2 The following diagram depicts monopolistically competitive firms.   Refer to Exhibit 14-2.In Graph B,a profit-maximizing (loss-minimizing)firm will experience a ____ at output quantity ____.

Accepted Answer

A)  loss; q1 
B)  loss; q2 
C)  profit; q1 
D)  profit; q2 
A)  loss; q1 
B)  loss; q2 
C)  profit; q1 
D)  profit; q2

Question 18

A monopolistically competitive firm differs from a perfectly competitive firm in that a monopolistically competitive firm:

Accepted Answer

A)  faces a downward-sloping demand curve for its product. 
B)  faces a horizontal demand curve at the market-clearing price. 
C)  is able to earn profits in the long run. 
D)  faces virtually no barriers to entry. 
A)  faces a downward-sloping demand curve for its product. 
B)  faces a horizontal demand curve at the market-clearing price. 
C)  is able to earn profits in the long run. 
D)  faces virtually no barriers to entry.

Question 19

In monopolistically competitive markets,economic losses ____,and ____ shifts the demand curve of the remaining firms to the ____.

Accepted Answer

A)  signal some remaining firms to exit; exit; right 
B)  signal some remaining firms to exit; exit; left 
C)  signal new firms to enter; entry; left 
D)  signal new firms to enter; entry; right 
A)  signal some remaining firms to exit; exit; right 
B)  signal some remaining firms to exit; exit; left 
C)  signal new firms to enter; entry; left 
D)  signal new firms to enter; entry; right

Question 20

When free entry is one of the attributes of a market structure,economic profits are:

Accepted Answer

A)  generally driven to zero in long-run equilibrium. 
B)  generally negative for all firms. 
C)  generally zero in the short run. 
D)  always positive. 
A)  generally driven to zero in long-run equilibrium. 
B)  generally negative for all firms. 
C)  generally zero in the short run. 
D)  always positive.

Exam 14: Monopolistic Competition and Product Differentiation

If the firm in the graph below represents the typical firm in a monopolistically competitive industry,what would be most likely to occur?

Exhibit 14-5 The graph depicts a monopolistically competitive firm's demand,marginal revenue,and cost curves. Refer to Exhibit 14-5.The monopolistically competitive firm depicted is:

Critics of advertising make which of the following claims about advertising? i.It often creates "needs" for trivial products. ii.It manipulates people's tastes. iii.It uses scarce resources and raises costs.

In monopolistically competitive market structure,because each good sold in the market is ____,each firm is considered a ____.

Define monopolistic competition.

If firms in a monopolistically competitive industry are making economic profits:

When marketing makes customers better informed about all firms in the market:

The market structure(s)most likely to exhibit extensive advertising is (are):

Monopolistic competition is similar to monopoly in that:

Exhibit 14-4 The following diagram depicts firms in monopolistically competitive markets. Refer to Exhibit 14-4.The extent of excess capacity of this firm is:

In equilibrium under monopolistic competition:

Monopolistic competition is characterized by:

Although there are certain inefficiencies associated with monopolistic competition,society receives a benefit from monopolistic competition in the form of product variety.

In the long run,monopolistically competitive firms typically produce with allocative efficiency.

Under monopolistic competition:

Explain how economic profits are reduced to zero as new firms enter a monopolistically competitive industry.

Exhibit 14-2 The following diagram depicts monopolistically competitive firms. Refer to Exhibit 14-2.In Graph B,a profit-maximizing (loss-minimizing)firm will experience a ____ at output quantity ____.

A monopolistically competitive firm differs from a perfectly competitive firm in that a monopolistically competitive firm:

In monopolistically competitive markets,economic losses ____,and ____ shifts the demand curve of the remaining firms to the ____.

When free entry is one of the attributes of a market structure,economic profits are:

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

In monopolistically competitive market structure,because each good sold in the market is ,each firm is considered a .

Exhibit 14-2 The following diagram depicts monopolistically competitive firms. Refer to Exhibit 14-2.In Graph B,a profit-maximizing (loss-minimizing)firm will experience a at output quantity .

In monopolistically competitive markets,economic losses ,and shifts the demand curve of the remaining firms to the .