Question 1

Table 13-1
  
-Refer to Table 13-1. The Table shows

Accepted Answer

A)  an elastic segment of the demand curve. 
B)  an inelastic segment of the demand curve. 
C)  a demand curve with an elastic segment of the demand curve from $7.50 to $6.50 followed by an inelastic segment. 
D)  a demand curve with an inelastic segment of the demand curve from $7.50 to $6.50 followed by an elastic segment. 
A)  an elastic segment of the demand curve. 
B)  an inelastic segment of the demand curve. 
C)  a demand curve with an elastic segment of the demand curve from $7.50 to $6.50 followed by an inelastic segment. 
D)  a demand curve with an inelastic segment of the demand curve from $7.50 to $6.50 followed by an elastic segment.

Question 2

Recent research has shown that the first firm to enter a market often does not have a long-term advantage over later entrants into the market. An example that has been used to illustrate this is

Accepted Answer

A)  McDonald's entry into the high-end coffee market. 
B)  Xerox, which became a generic term for making photocopies. 
C)  Abercrombie and Fitch, which was the first clothing company to market to young men. 
D)  the introduction of the first ballpoint pen in 1945. 
A)  McDonald's entry into the high-end coffee market. 
B)  Xerox, which became a generic term for making photocopies. 
C)  Abercrombie and Fitch, which was the first clothing company to market to young men. 
D)  the introduction of the first ballpoint pen in 1945.

Question 3

What is the difference between zero accounting profit and zero economic profit?

Accepted Answer

Economic profits take into account oppor

Question 4

In the highly competitive fast-food restaurant market, brand name restaurants have a strong profit incentive to maintain high sanitary conditions and avoid any negative consequences.

Accepted Answer

A) True 
 B)False

Question 5

A monopolistically competitive firm maximizes profit in the short run by producing where

Accepted Answer

A)  price is less than marginal cost. 
B)  price is less than marginal revenue. 
C)  price is less than average revenue. 
D)  price is greater than marginal cost. 
A)  price is less than marginal cost. 
B)  price is less than marginal revenue. 
C)  price is less than average revenue. 
D)  price is greater than marginal cost.

Question 6

If firms in a monopolistically competitive market are earning economic profits, which of the following scenarios best reflects the change a representative firm experiences as the market adjusts to its long-run equilibrium?

Accepted Answer

A)  Demand decreases and becomes less elastic. 
B)  Demand decreases and becomes more elastic. 
C)  Demand increases and becomes less elastic. 
D)  Demand increases and becomes more elastic. 
A)  Demand decreases and becomes less elastic. 
B)  Demand decreases and becomes more elastic. 
C)  Demand increases and becomes less elastic. 
D)  Demand increases and becomes more elastic.

Question 7

Why would an organization as large as the National Football League (NFL) incur large legal expenses to try to prevent bars and restaurants from using their trademarked term "Super Bowl" in their advertising?

Accepted Answer

The National Football League has spent a

Question 8

What is the trade-off that consumers face when buying the product of a monopolistically competitive firm?

Accepted Answer

A)  Consumers pay higher prices but receive better quality goods compared to the output of perfectly competitive firms. 
B)  Consumers pay a price greater than marginal cost, but have the luxury of choices more suited to their tastes. 
C)  Consumers pay higher prices but the products are produced by highly efficient firms. 
D)  Consumers pay lower prices but have fewer choices. 
A)  Consumers pay higher prices but receive better quality goods compared to the output of perfectly competitive firms. 
B)  Consumers pay a price greater than marginal cost, but have the luxury of choices more suited to their tastes. 
C)  Consumers pay higher prices but the products are produced by highly efficient firms. 
D)  Consumers pay lower prices but have fewer choices.

Question 9

The reason that the coffeehouse market is monopolistically competitive rather than perfectly competitive is because

Accepted Answer

A)  barriers to entry are very low. 
B)  there are many firms in the market. 
C)  products are differentiated. 
D)  entry into the market is blocked. 
A)  barriers to entry are very low. 
B)  there are many firms in the market. 
C)  products are differentiated. 
D)  entry into the market is blocked.

Question 10

Only one of the following statements is correct. The statements compare perfectly competitive (PC) markets and monopolistically competitive (MC) markets. Which statement is correct?

Accepted Answer

A)  Productive efficiency is achieved in both PC and MC markets. Allocative efficiency is achieved only in MC markets. 
B)  Allocative efficiency is achieved in both PC and MC markets. Productive efficiency is achieved only in PC markets. 
C)  Productive efficiency and allocative efficiency are both achieved in PC markets. Neither is achieved in MC markets. 
D)  Allocative efficiency is achieved only in PC markets. Productive efficiency is achieved only in MC markets. 
A)  Productive efficiency is achieved in both PC and MC markets. Allocative efficiency is achieved only in MC markets. 
B)  Allocative efficiency is achieved in both PC and MC markets. Productive efficiency is achieved only in PC markets. 
C)  Productive efficiency and allocative efficiency are both achieved in PC markets. Neither is achieved in MC markets. 
D)  Allocative efficiency is achieved only in PC markets. Productive efficiency is achieved only in MC markets.

Question 11

Both monopolistically competitive firms and perfectly competitive firms maximize profits

Accepted Answer

A)  by producing where price equals average total cost. 
B)  by producing where marginal revenue equals average revenue. 
C)  by producing where marginal revenue is equal to marginal cost. 
D)  by producing where price equals average variable cost. 
A)  by producing where price equals average total cost. 
B)  by producing where marginal revenue equals average revenue. 
C)  by producing where marginal revenue is equal to marginal cost. 
D)  by producing where price equals average variable cost.

Question 12

One of your classmates asserts that advertising, marketing research, and brand management are redundant expenditures because a firm can obtain the same information by simply looking at what customers are already buying. Which of the following is not a response you might offer her?

Accepted Answer

A)  Conducting market research is a good way for firms to keep abreast of changing consumer tastes and preferences. 
B)  Advertising and brand management allow a firm to create an entry barrier which will insulate the firm from competition and from undertaking further product innovations. 
C)  Marketing research could allow a firm to identify new market opportunities and at least, in the short run, a firm can make a profit supplying products to this market segment. 
D)  If a firm successfully manages its brand, customers become less price sensitive as they perceive fewer substitutes for the firm's brand. 
A)  Conducting market research is a good way for firms to keep abreast of changing consumer tastes and preferences. 
B)  Advertising and brand management allow a firm to create an entry barrier which will insulate the firm from competition and from undertaking further product innovations. 
C)  Marketing research could allow a firm to identify new market opportunities and at least, in the short run, a firm can make a profit supplying products to this market segment. 
D)  If a firm successfully manages its brand, customers become less price sensitive as they perceive fewer substitutes for the firm's brand.

Question 13

Despite being in a market with ________, from the mid-1990s to the mid-2000s Starbucks was able to significantly differentiate its products from the products of its competitors.

Accepted Answer

A)  few barriers to entry 
B)  significant barriers to entry 
C)  blocked entry 
D)  no barriers to entry 
A)  few barriers to entry 
B)  significant barriers to entry 
C)  blocked entry 
D)  no barriers to entry

Question 14

Figure 13-12   Figure 13-12 shows short-run cost and demand curves for a monopolistically competitive firm in the market for designer watches.
-Refer to Figure 13-12. If the diagram represents a typical firm in the designer watch market, what is likely to happen in the long run?

Accepted Answer

A)  Some firms will exit the market causing the demand to increase for firms remaining in the market. 
B)  The firms that are making losses will be purchased by their more successful rivals. 
C)  Inefficient firms will exit the market and new cost efficient firms will enter the market. 
D)  Firms will have to raise their prices to cover costs of production. 
A)  Some firms will exit the market causing the demand to increase for firms remaining in the market. 
B)  The firms that are making losses will be purchased by their more successful rivals. 
C)  Inefficient firms will exit the market and new cost efficient firms will enter the market. 
D)  Firms will have to raise their prices to cover costs of production.

Question 15

Figure 13-17  
-Refer to Figure 13-17. In the long run, why will the firm produce Qf units and not Qg units, which has a lower its average cost of production?

Accepted Answer

A)  Although its average cost of production is lower when the firm produces Qg units, to be able to sell its output the firm will have to charge a price below average cost, resulting in a loss. 
B)  At Qg, average cost exceeds marginal cost so the firm will actually make a loss. 
C)  At Qg, marginal revenue is less than average revenue which will result in a loss for the firm. 
D)  The firm's goal is to charge a high price and make a small profit rather than a low price and no profit. 
A)  Although its average cost of production is lower when the firm produces Qg units, to be able to sell its output the firm will have to charge a price below average cost, resulting in a loss. 
B)  At Qg, average cost exceeds marginal cost so the firm will actually make a loss. 
C)  At Qg, marginal revenue is less than average revenue which will result in a loss for the firm. 
D)  The firm's goal is to charge a high price and make a small profit rather than a low price and no profit.

Question 16

Which of the following is true of trademarks?

Accepted Answer

A)  A successful trademark is one that becomes a generic name for a product, for example, "Xerox" has become a generic term for making photocopies. 
B)  A successful trademark is one that allows consumers to immediately identify the source or producer of the product. 
C)  If a firm is granted a trademark, then no other firms can legally produce similar products for a given period of time. 
D)  If a firm is granted a trademark, then no other firms can legally sell in the same geographic area for a given period of time. 
A)  A successful trademark is one that becomes a generic name for a product, for example, "Xerox" has become a generic term for making photocopies. 
B)  A successful trademark is one that allows consumers to immediately identify the source or producer of the product. 
C)  If a firm is granted a trademark, then no other firms can legally produce similar products for a given period of time. 
D)  If a firm is granted a trademark, then no other firms can legally sell in the same geographic area for a given period of time.

Exam 13: Monopolistic Competition: the Competitive Model in a More Realistic Setting

Table 13-1 -Refer to Table 13-1. The Table shows

Recent research has shown that the first firm to enter a market often does not have a long-term advantage over later entrants into the market. An example that has been used to illustrate this is

What is the difference between zero accounting profit and zero economic profit?

In the highly competitive fast-food restaurant market, brand name restaurants have a strong profit incentive to maintain high sanitary conditions and avoid any negative consequences.

A monopolistically competitive firm maximizes profit in the short run by producing where

If firms in a monopolistically competitive market are earning economic profits, which of the following scenarios best reflects the change a representative firm experiences as the market adjusts to its long-run equilibrium?

Why would an organization as large as the National Football League (NFL) incur large legal expenses to try to prevent bars and restaurants from using their trademarked term "Super Bowl" in their advertising?

What is the trade-off that consumers face when buying the product of a monopolistically competitive firm?

The reason that the coffeehouse market is monopolistically competitive rather than perfectly competitive is because

Only one of the following statements is correct. The statements compare perfectly competitive (PC) markets and monopolistically competitive (MC) markets. Which statement is correct?

Both monopolistically competitive firms and perfectly competitive firms maximize profits

One of your classmates asserts that advertising, marketing research, and brand management are redundant expenditures because a firm can obtain the same information by simply looking at what customers are already buying. Which of the following is not a response you might offer her?

Despite being in a market with ________, from the mid-1990s to the mid-2000s Starbucks was able to significantly differentiate its products from the products of its competitors.

Figure 13-12 Figure 13-12 shows short-run cost and demand curves for a monopolistically competitive firm in the market for designer watches. -Refer to Figure 13-12. If the diagram represents a typical firm in the designer watch market, what is likely to happen in the long run?

Figure 13-17 -Refer to Figure 13-17. In the long run, why will the firm produce Qf units and not Qg units, which has a lower its average cost of production?

Which of the following is true of trademarks?

Economics: Foundations and Models

Trade-Offs, Comparative Advantage, and the Market System

Where Prices Come From: the Interaction of Demand and Supply

Economic Efficiency, Government Price Setting, and Taxes

Externalities, Environmental Policy, and Public Goods

Elasticity: the Responsiveness of Demand and Supply

The Economics of Health Care

Firms, the Stock Market, and Corporate Governance

Comparative Advantage and the Gains From International Trade

Consumer Choice and Behavioral Economics

Technology, Production, and Costs

Firms in Perfectly Competitive Markets

Oligopoly: Firms in Less Competitive Markets

Monopoly and Antitrust Policy

Pricing Strategy

The Markets for Labor and Other Factors of Production

Public Choice, Taxes, and the Distribution of Income

GDP: Measuring Total Production and Income

Unemployment and Inflation

Economic Growth, the Financial System, and Business Cycles

Long-Run Economic Growth: Sources and Policies

Aggregate Expenditure and Output in the Short Run

Aggregate Demand and Aggregate Supply Analysis

Money, Banks, and the Federal Reserve System

Monetary Policy

Fiscal Policy

Inflation, Unemployment, and Federal Reserve Policy

Macroeconomics in an Open Economy

The International Financial System

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