Question 1

In long-run equilibrium, a profit-maximizing firm in a monopolistically competitive industry will produce the quantity of output where

Accepted Answer

A)  ATC = P, MR = MC = P. 
B)  ATC < P, MR = MC = P. 
C)  ATC < P, MR + MC < P. 
D)  ATC = P, MR = MC < P. 
A)  ATC = P, MR = MC = P. 
B)  ATC < P, MR = MC = P. 
C)  ATC < P, MR + MC < P. 
D)  ATC = P, MR = MC < P. D

Question 2

(Last Word) Which of the following best explains why an increase in the minimum wage is more problematic for mom and pop restaurants than for big chain restaurants?

Accepted Answer

A)  Chain restaurants are exempt from minimum wage laws. 
B)  Mom and pop restaurants have more difficulty attracting workers when wages rise. 
C)  Mom and pop restaurants are more dependent on labor relative to chain restaurants. 
D)  Chain restaurants have more monopoly pricing power and can more easily raise prices than mom and pop stores. 
A)  Chain restaurants are exempt from minimum wage laws. 
B)  Mom and pop restaurants have more difficulty attracting workers when wages rise. 
C)  Mom and pop restaurants are more dependent on labor relative to chain restaurants. 
D)  Chain restaurants have more monopoly pricing power and can more easily raise prices than mom and pop stores. C

Question 3

For which market model can we not assume a homogeneous product?

Accepted Answer

A)  pure competition 
B)  pure monopoly 
C)  monopolistic competition 
D)  oligopoly 
A)  pure competition 
B)  pure monopoly 
C)  monopolistic competition 
D)  oligopoly C

Question 4

"Excess capacity" exists in monopolistic competition but not in pure competition.

Accepted Answer

A) True 
 B)False

Question 5

Monopolistically competitive firms exist due to high barriers to entry.

Accepted Answer

A) True 
 B)False

Question 6

If the number of firms in a monopolistically competitive industry increases and the degree of product differentiation diminishes,

Accepted Answer

A)  the likelihood of realizing economic profits in the long run would be enhanced. 
B)  individual firms would now be operating at outputs where their average total costs would be higher. 
C)  the industry would more closely approximate pure competition. 
D)  the likelihood of collusive pricing would increase. 
A)  the likelihood of realizing economic profits in the long run would be enhanced. 
B)  individual firms would now be operating at outputs where their average total costs would be higher. 
C)  the industry would more closely approximate pure competition. 
D)  the likelihood of collusive pricing would increase.

Question 7

(Last Word) If the minimum wage in the restaurant industry increases over time, eventually we would expect

Accepted Answer

A)  the restaurant industry to expand as higher wages drive up demand. 
B)  there to be fewer of all types of restaurants, but no change in the proportion of mom and pop restaurants relative to chain restaurants. 
C)  the ratio of mom and pop restaurants to highly capitalized chain restaurants to increase. 
D)  the ratio of highly capitalized chain restaurants to mom and pop restaurants to increase. 
A)  the restaurant industry to expand as higher wages drive up demand. 
B)  there to be fewer of all types of restaurants, but no change in the proportion of mom and pop restaurants relative to chain restaurants. 
C)  the ratio of mom and pop restaurants to highly capitalized chain restaurants to increase. 
D)  the ratio of highly capitalized chain restaurants to mom and pop restaurants to increase.

Question 8

The following pairs of products illustrate product differentiation, except

Accepted Answer

A)  Coke and Pepsi. 
B)  tank tops and denim shorts. 
C)  airport hotels and downtown hotels. 
D)  New York-style pizza and Chicago-style pizza. 
A)  Coke and Pepsi. 
B)  tank tops and denim shorts. 
C)  airport hotels and downtown hotels. 
D)  New York-style pizza and Chicago-style pizza.

Question 9

Which of the following assumptions is part of the model of monopolistic competition?

Accepted Answer

A)  Firms make identical or homogeneous products. 
B)  There is no mutual interdependence among firms. 
C)  There are significant barriers to entry into the market. 
D)  Firms have no control over their products' prices. 
A)  Firms make identical or homogeneous products. 
B)  There is no mutual interdependence among firms. 
C)  There are significant barriers to entry into the market. 
D)  Firms have no control over their products' prices.

Question 10

Monopolistically competitive and purely competitive industries are similar in that

Accepted Answer

A)  both are assured of short-run economic profits. 
B)  both produce differentiated products. 
C)  the demand curves facing individual firms are perfectly elastic in both industries. 
D)  there are few, if any, barriers to entry. 
A)  both are assured of short-run economic profits. 
B)  both produce differentiated products. 
C)  the demand curves facing individual firms are perfectly elastic in both industries. 
D)  there are few, if any, barriers to entry.

Question 11

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

Accepted Answer

A)  Price equals minimum average total cost. 
B)  Marginal cost equals marginal revenue. 
C)  Price is equal to average total cost. 
D)  Price exceeds marginal cost. 
A)  Price equals minimum average total cost. 
B)  Marginal cost equals marginal revenue. 
C)  Price is equal to average total cost. 
D)  Price exceeds marginal cost.

Question 12

The following are the respective numbers for the four-firm concentration ratio and Herfindahl index in an industry. Which set of numbers would suggest that the industry was monopolistically competitive?

Accepted Answer

A)  25 and 207 
B)  76 and 2662 
C)  80 and 1800 
D)  89 and 2582 
A)  25 and 207 
B)  76 and 2662 
C)  80 and 1800 
D)  89 and 2582

Question 13

Answer the question based on the demand and cost schedules for a monopolistically competitive firm given in the table below. $\begin{array} { | c | c | c | c | } 
\hline \text { Price } & \begin{array} { c } 
\text { Quntity } \
\text { Dennded }
\end{array} & \begin{array} { c } 
\text { Total } \
\text { Cost }
\end{array} & \text { Output } \
\hline \$ 20 & 1 & \$ 10 & 1 \
\hline 18 & 2 & 20 & 2 \
\hline 16 & 3 & 29 & 3 \
\hline 14 & 4 & 36 & 4 \
\hline 12 & 5 & 40 & 5 \
\hline 10 & 6 & 42 & 6 \
\hline
\end{array}$ At the profit-maximizing level of output, marginal revenue is

Accepted Answer

A)  $0. 
B)  $4. 
C)  $5. 
D)  $8. 
A)  $0. 
B)  $4. 
C)  $5. 
D)  $8.

Question 14

The monopolistically competitive seller's demand curve will become more elastic the

Accepted Answer

A)  more significant the barriers to entering the industry. 
B)  greater the degree of product differentiation. 
C)  larger the number of competitors. 
D)  smaller the number of competitors. 
A)  more significant the barriers to entering the industry. 
B)  greater the degree of product differentiation. 
C)  larger the number of competitors. 
D)  smaller the number of competitors.

Question 15

A significant difference between a monopolistically competitive firm and a purely competitive firm is that the

Accepted Answer

A)  former has fewer barriers to entry into the industry. 
B)  latter recognizes that price must be reduced to sell more output. 
C)  latterâ€™s demand curve is perfectly elastic. 
D)  latter differentiates its product. 
A)  former has fewer barriers to entry into the industry. 
B)  latter recognizes that price must be reduced to sell more output. 
C)  latterâ€™s demand curve is perfectly elastic. 
D)  latter differentiates its product.

Question 16

Monopolistic competitive firms are productively inefficient because production occurs where

Accepted Answer

A)  price is greater than marginal revenue. 
B)  marginal cost is less than price. 
C)  marginal cost is not at its lowest. 
D)  average total cost is not at its lowest. 
A)  price is greater than marginal revenue. 
B)  marginal cost is less than price. 
C)  marginal cost is not at its lowest. 
D)  average total cost is not at its lowest.

Question 17

Which of the following characteristics provide a monopolistically competitive firm some monopoly power?

Accepted Answer

A)  significant barriers to entry into the industry 
B)  product differentiation 
C)  a low concentration ratio in the industry 
D)  price discrimination 
A)  significant barriers to entry into the industry 
B)  product differentiation 
C)  a low concentration ratio in the industry 
D)  price discrimination

Question 18

If the four-firm concentration ratio for industry X is 80,

Accepted Answer

A)  the four largest firms account for 80 percent of total sales. 
B)  each of the four largest firms accounts for 20 percent of total sales. 
C)  the four largest firms account for 20 percent of total sales. 
D)  the industry is monopolistically competitive. 
A)  the four largest firms account for 80 percent of total sales. 
B)  each of the four largest firms accounts for 20 percent of total sales. 
C)  the four largest firms account for 20 percent of total sales. 
D)  the industry is monopolistically competitive.

Question 19

Long-run equilibrium for a monopolistically competitive firm where economic profits are zero results from

Accepted Answer

A)  rising marginal costs. 
B)  a perfectly elastic product demand curve. 
C)  relatively easy entry. 
D)  product differentiation and development. 
A)  rising marginal costs. 
B)  a perfectly elastic product demand curve. 
C)  relatively easy entry. 
D)  product differentiation and development.

Question 20

When a monopolistically competitive firm is in long-run equilibrium,

Accepted Answer

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

Exam 13: Monopolistic Competition

In long-run equilibrium, a profit-maximizing firm in a monopolistically competitive industry will produce the quantity of output where

(Last Word) Which of the following best explains why an increase in the minimum wage is more problematic for mom and pop restaurants than for big chain restaurants?

For which market model can we not assume a homogeneous product?

"Excess capacity" exists in monopolistic competition but not in pure competition.

Monopolistically competitive firms exist due to high barriers to entry.

If the number of firms in a monopolistically competitive industry increases and the degree of product differentiation diminishes,

(Last Word) If the minimum wage in the restaurant industry increases over time, eventually we would expect

The following pairs of products illustrate product differentiation, except

Which of the following assumptions is part of the model of monopolistic competition?

Monopolistically competitive and purely competitive industries are similar in that

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

The following are the respective numbers for the four-firm concentration ratio and Herfindahl index in an industry. Which set of numbers would suggest that the industry was monopolistically competitive?

Answer the question based on the demand and cost schedules for a monopolistically competitive firm given in the table below. Price Quntity Dennded Total Cost Output \ 20 1 \ 10 1 18 2 20 2 16 3 29 3 14 4 36 4 12 5 40 5 10 6 42 6 At the profit-maximizing level of output, marginal revenue is

The monopolistically competitive seller's demand curve will become more elastic the

A significant difference between a monopolistically competitive firm and a purely competitive firm is that the

Monopolistic competitive firms are productively inefficient because production occurs where

Which of the following characteristics provide a monopolistically competitive firm some monopoly power?

If the four-firm concentration ratio for industry X is 80,

Long-run equilibrium for a monopolistically competitive firm where economic profits are zero results from

When a monopolistically competitive firm is in long-run equilibrium,

Limits, Alternatives, and Choices

The Market System and the Circular Flow

Demand, Supply, and Market Equilibrium

Market Failures: Public Goods and Externalities

Governments Role and Government Failure

Elasticity

Utility Maximization

Behavioral Economics

Businesses and the Costs of Production

Pure Competition in the Short Run

Pure Competition in the Long Run

Pure Monopoly

Oligopoly and Strategic Behavior

Technology, Rd, and Efficiency

The Demand for Resources

Wage Determination

Rent, Interest, and Profit

Natural Resource and Energy Economics

Public Finance: Expenditures and Taxes

Antitrust Policy and Regulation

Agriculture: Economics and Policy

Income Inequality, Poverty, and Discrimination

Health Care

Immigration

International Trade

The Balance of Payments, Exchange Rates, and Trade Deficits

The Economics of Developing Countries

Filters