Question 1

Which is true of pure competition but not of monopolistic competition?

Accepted Answer

A)  There are no significant barriers to entry. 
B)  Long-run economic profits are zero. 
C)  There are a large number of firms in the market. 
D)  Long-run equilibrium occurs at the minimum point on the ATC curve. 
A)  There are no significant barriers to entry. 
B)  Long-run economic profits are zero. 
C)  There are a large number of firms in the market. 
D)  Long-run equilibrium occurs at the minimum point on the ATC curve.

Question 2

The graph depicts a monopolistically competitive firm.   In the short run, this monopolistically competitive firm will set the price at

Accepted Answer

A)  $55 and produce 45 units of output. 
B)  $65 and produce 35 units of output. 
C)  $50 and produce 35 units of output. 
D)  $52 and produce 50 units of output. 
A)  $55 and produce 45 units of output. 
B)  $65 and produce 35 units of output. 
C)  $50 and produce 35 units of output. 
D)  $52 and produce 50 units of output.

Question 3

The restaurant, legal assistance, and clothing industries are each illustrations of

Accepted Answer

A)  countervailing power. 
B)  homogeneous oligopoly. 
C)  monopolistic competition. 
D)  pure monopoly. 
A)  countervailing power. 
B)  homogeneous oligopoly. 
C)  monopolistic competition. 
D)  pure monopoly.

Question 4

The amount of excess capacity in pure competition tends to become larger the more elastic the individual firmâ€™s demand curve becomes.

Accepted Answer

A) True 
 B)False

Question 5

The monopolistically competitive seller maximizes profit by producing at the point where

Accepted Answer

A)  total revenue is at a maximum. 
B)  average costs are at a minimum. 
C)  marginal revenue equals marginal cost. 
D)  price equals marginal revenue. 
A)  total revenue is at a maximum. 
B)  average costs are at a minimum. 
C)  marginal revenue equals marginal cost. 
D)  price equals marginal revenue.

Question 6

The four-firm concentration ratio cannot have a value above 1.0.

Accepted Answer

A) True 
 B)False

Question 7

The stronger the product differentiation in monopolistic competition, the

Accepted Answer

A)  less elastic the demand curve, and production will take place further to the left of minimum average costs. 
B)  less elastic the demand curve, and production will take place further to the right of minimum average costs. 
C)  more elastic the demand curve, and production will take place further to the left of minimum average costs. 
D)  more elastic the demand curve, and production will take place further to the right of minimum average costs. 
A)  less elastic the demand curve, and production will take place further to the left of minimum average costs. 
B)  less elastic the demand curve, and production will take place further to the right of minimum average costs. 
C)  more elastic the demand curve, and production will take place further to the left of minimum average costs. 
D)  more elastic the demand curve, and production will take place further to the right of minimum average costs.

Question 8

In the long-run equilibrium of a monopolistically competitive industry,

Accepted Answer

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

Question 9

The larger the number of firms and the smaller the degree of product differentiation, the

Accepted Answer

A)  greater the divergence between the demand and the marginal revenue curves of the monopolistically competitive firm. 
B)  larger will be the monopolistically competitive firm's fixed costs. 
C)  less elastic is the monopolistically competitive firm's demand curve. 
D)  more elastic is the monopolistically competitive firm's demand curve. 
A)  greater the divergence between the demand and the marginal revenue curves of the monopolistically competitive firm. 
B)  larger will be the monopolistically competitive firm's fixed costs. 
C)  less elastic is the monopolistically competitive firm's demand curve. 
D)  more elastic is the monopolistically competitive firm's demand curve.

Question 10

Dequam likes product variety, while Natasha is most concerned about paying the lowest price possible for a good. This suggests that

Accepted Answer

A)  Dequam cares more about allocative efficiency, while Natasha cares more about productive efficiency. 
B)  Dequam cares more about productive efficiency, while Natasha cares more about allocative efficiency. 
C)  Dequam prefers monopolistically competitive industries, while Natasha prefers purely competitive industries. 
D)  Dequam prefers purely competitive industries, while Natasha prefers monopolistically competitive industries. 
A)  Dequam cares more about allocative efficiency, while Natasha cares more about productive efficiency. 
B)  Dequam cares more about productive efficiency, while Natasha cares more about allocative efficiency. 
C)  Dequam prefers monopolistically competitive industries, while Natasha prefers purely competitive industries. 
D)  Dequam prefers purely competitive industries, while Natasha prefers monopolistically competitive industries.

Question 11

In which of these continuums of degrees of competition (highest to lowest) is monopolistic competition properly placed?

Accepted Answer

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

Question 12

In monopolistic competition, easy industry entry and exit drives long-run profits of firms to zero.

Accepted Answer

A) True 
 B)False

Question 13

Which of the following is not a basic characteristic of monopolistic competition?

Accepted Answer

A)  the use of trademarks and brand names 
B)  recognized mutual interdependence 
C)  product differentiation 
D)  a relatively large number of sellers 
A)  the use of trademarks and brand names 
B)  recognized mutual interdependence 
C)  product differentiation 
D)  a relatively large number of sellers

Question 14

The excess capacity problem associated with monopolistic competition implies that fewer firms could produce the same industry output at a lower total cost.

Accepted Answer

A) True 
 B)False

Exam 13: Monopolistic Competition

Which is true of pure competition but not of monopolistic competition?

The graph depicts a monopolistically competitive firm. In the short run, this monopolistically competitive firm will set the price at

The restaurant, legal assistance, and clothing industries are each illustrations of

The amount of excess capacity in pure competition tends to become larger the more elastic the individual firmâ€™s demand curve becomes.

The monopolistically competitive seller maximizes profit by producing at the point where

The four-firm concentration ratio cannot have a value above 1.0.

The stronger the product differentiation in monopolistic competition, the

In the long-run equilibrium of a monopolistically competitive industry,

The larger the number of firms and the smaller the degree of product differentiation, the

Dequam likes product variety, while Natasha is most concerned about paying the lowest price possible for a good. This suggests that

In which of these continuums of degrees of competition (highest to lowest) is monopolistic competition properly placed?

In monopolistic competition, easy industry entry and exit drives long-run profits of firms to zero.

Which of the following is not a basic characteristic of monopolistic competition?

The excess capacity problem associated with monopolistic competition implies that fewer firms could produce the same industry output at a lower total cost.

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

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