Question 1

Which of the following will not happen as a consequence of a monopolistically competitive firm suffering economic losses in the short run?

Accepted Answer

A)  The firm's demand curve will shift to the right if it stays in business in the long run. 
B)  The firm will exit the industry if it continues to suffer economic losses. 
C)  The firm will break even if it stays in business in the long run. 
D)  In the long run, the firm will be able to charge a price that is greater than its average total cost. 
A)  The firm's demand curve will shift to the right if it stays in business in the long run. 
B)  The firm will exit the industry if it continues to suffer economic losses. 
C)  The firm will break even if it stays in business in the long run. 
D)  In the long run, the firm will be able to charge a price that is greater than its average total cost.

Question 2

If a monopolistically competitive firm has excess capacity,

Accepted Answer

A)  it has exhausted all economies of scale. 
B)  it is producing beyond the minimum efficient scale. 
C)  it is experiencing diseconomies of scale. 
D)  it produces an output rate that places it on the negatively-sloped portion of its average total cost curve. 
A)  it has exhausted all economies of scale. 
B)  it is producing beyond the minimum efficient scale. 
C)  it is experiencing diseconomies of scale. 
D)  it produces an output rate that places it on the negatively-sloped portion of its average total cost curve.

Question 3

A game in which each player adopts its dominant strategy

Accepted Answer

A)  will not lead to an equilibrium. 
B)  must be a cooperative game. 
C)  could result in a Nash equilibrium. 
D)  can never result in a Nash equilibrium. 
A)  will not lead to an equilibrium. 
B)  must be a cooperative game. 
C)  could result in a Nash equilibrium. 
D)  can never result in a Nash equilibrium.

Question 4

A monopolistically competitive firm chooses

Accepted Answer

A)  both the quantity of output to produce and the price at which it will sell its output. 
B)  the price of the product it sells, but market forces determine the quantity it will be able to sell. 
C)  the quantity of output to produce, but the price of the product it sells is determined collectively by all firms in the industry. 
D)  the price of the product it sells, but the quantity of output to produce is agreed upon by all firms in the industry. 
A)  both the quantity of output to produce and the price at which it will sell its output. 
B)  the price of the product it sells, but market forces determine the quantity it will be able to sell. 
C)  the quantity of output to produce, but the price of the product it sells is determined collectively by all firms in the industry. 
D)  the price of the product it sells, but the quantity of output to produce is agreed upon by all firms in the industry.

Question 5

The Table below shows the demand and cost data facing 'Velvet Touches,' a monopolistically competitive producer of velvet throw pillows.
   Use the data to answer the following questions.
a.Complete the Total Revenue (TR),Marginal Revenue (MR)and Marginal Cost (MC)columns above.
b.What are the profit-maximising price and quantity for Velvet Touches?
c.Is the firm making a profit or a loss? How much is the profit or loss? Show your work.
d.Is this firm operating in the long run or in the short run? Explain your answer.
e.If the firm's profit or loss is typical of all firms in the market for throw pillows,what is likely to happen in the future? Will there be more firms or will some existing firms leave the industry? Explain your answer.
f.What will happen to the typical firm's profit or loss after all entry/exit adjustments?

Accepted Answer

a.
 @#IMG-DLM& 
b.Q = 5; P = $22
c.Profit = $(110

Question 6

What are the most important differences between perfectly competitive markets and monopolistically competitive markets?

Accepted Answer

In both perfectly competitive and monopo

Question 7

Economies of scale can lead to an oligopolistic market structure because

Accepted Answer

A)  if larger firms have lower costs, new small entrants will not be able to produce at the low costs achieved by the big established firms. 
B)  if economies of scale are insignificant, only a few firms are able to produce at the low costs achieved by the big established firms. 
C)  a few firms can force rivals to produce at low levels of output. 
D)  a few firms can use high profits to keep out new entrants. 
A)  if larger firms have lower costs, new small entrants will not be able to produce at the low costs achieved by the big established firms. 
B)  if economies of scale are insignificant, only a few firms are able to produce at the low costs achieved by the big established firms. 
C)  a few firms can force rivals to produce at low levels of output. 
D)  a few firms can use high profits to keep out new entrants.

Question 8

If a perfectly competitive firm maximises short-run profits,its marginal revenue will be positive and less than its price.

Accepted Answer

A) True 
 B)False

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

Figure 9-7   Figure 9-7 shows short-run cost and demand curves for a monopolistically competitive firm in the footwear market.
-Refer to Figure 9-7.Which of the following statements describes the best course of action for the firm depicted in the diagram?

Accepted Answer

A)  The firm should exit the industry because its price is less than its average total cost. 
B)  The firm should minimise its losses by producing Qy units and charging a price of P0. 
C)  The firm should minimise its losses by producing Qy units and charging a price of P2. 
D)  The firm should minimise its losses by producing Qy units and charging a price of P1. 
A)  The firm should exit the industry because its price is less than its average total cost. 
B)  The firm should minimise its losses by producing Qy units and charging a price of P0. 
C)  The firm should minimise its losses by producing Qy units and charging a price of P2. 
D)  The firm should minimise its losses by producing Qy units and charging a price of P1.

Question 11

What is meant by the term 'government-imposed barrier to entry'? Why would a government be willing to impose barriers to entering an industry?

Accepted Answer

Government-imposed barriers to entry are

Question 12

A characteristic found only in oligopolies is

Accepted Answer

A)  a break-even level of profits. 
B)  the interdependence of firms. 
C)  the independence of firms. 
D)  products that are slightly different. 
A)  a break-even level of profits. 
B)  the interdependence of firms. 
C)  the independence of firms. 
D)  products that are slightly different.

Question 13

Figure 9-12  
-Refer to Figure 9-12.The firm represented in the diagram

Accepted Answer

A)  makes zero economic profit. 
B)  makes zero accounting profit. 
C)  should exit the industry. 
D)  should expand its output to take advantage of economies of scale. 
A)  makes zero economic profit. 
B)  makes zero accounting profit. 
C)  should exit the industry. 
D)  should expand its output to take advantage of economies of scale.

Question 14

New firms are able to enter monopolistically competitive markets because there are low barriers to entry.

Accepted Answer

A) True 
 B)False

Question 15

An equilibrium in a game in which players pursue their own self-interest is called

Accepted Answer

A)  a Nash equilibrium. 
B)  a cooperative equilibrium. 
C)  a non-cooperative equilibrium. 
D)  a prisoner's dilemma. 
A)  a Nash equilibrium. 
B)  a cooperative equilibrium. 
C)  a non-cooperative equilibrium. 
D)  a prisoner's dilemma.

Question 16

A monopolistically competitive firm that is earning profits will,in the long run,experience all of the following except

Accepted Answer

A)  new rivals entering the market. 
B)  a decrease in demand for its product. 
C)  demand for the firm's product becomes more elastic. 
D)  a decrease in the number of rival products. 
A)  new rivals entering the market. 
B)  a decrease in demand for its product. 
C)  demand for the firm's product becomes more elastic. 
D)  a decrease in the number of rival products.

Question 17

Which of the following is not a barrier to entry?

Accepted Answer

A)  An inelastic demand curve 
B)  Economies of scale 
C)  Ownership of a key input 
D)  A patent 
A)  An inelastic demand curve 
B)  Economies of scale 
C)  Ownership of a key input 
D)  A patent

Question 18

What is meant by 'excess capacity'? How does it relate to consumer utility?

Accepted Answer

Excess capacity refers to a situation wh

Question 19

Figure 9-10   Figure 9-10 shows cost and demand curves for a monopolistically competitive producer of iced tea.
-Refer to Figure 9-10 to answer the following questions.
a.What is the profit-maximising output level?
b.What is the profit-maximising price?
c.At the profit-maximising output level,how much profit will be realised?
d.Does this graph most likely represent the long run or the short run? Why?

Accepted Answer

a.The profit-maximising output

Question 20

Economists have long debated whether there is a significant loss of wellbeing to society in markets that are monopolistically competitive rather than perfectly competitive.Which of the following offers the best reason why some economists believe that monopolistically competitive markets benefit consumers despite any loss of wellbeing?

Accepted Answer

A)  Although consumers may pay a price greater than marginal cost for a product, the product is produced at the minimum average total cost. 
B)  Although consumers may pay a price greater than marginal cost and the product is not produced at minimum average total cost, they benefit from being able to buy a differentiated product more closely suited to their tastes. 
C)  Consumers pay a price equal to the marginal cost of producing a product, even though it is not produced at the minimum average total cost. 
D)  Consumers are better off choosing from a variety of differentiated products, even though product differentiation causes barriers that restrict entry into monopolistically competitive markets. 
A)  Although consumers may pay a price greater than marginal cost for a product, the product is produced at the minimum average total cost. 
B)  Although consumers may pay a price greater than marginal cost and the product is not produced at minimum average total cost, they benefit from being able to buy a differentiated product more closely suited to their tastes. 
C)  Consumers pay a price equal to the marginal cost of producing a product, even though it is not produced at the minimum average total cost. 
D)  Consumers are better off choosing from a variety of differentiated products, even though product differentiation causes barriers that restrict entry into monopolistically competitive markets.

Which of the following will not happen as a consequence of a monopolistically competitive firm suffering economic losses in the short run?

If a monopolistically competitive firm has excess capacity,

A game in which each player adopts its dominant strategy

A monopolistically competitive firm chooses

What are the most important differences between perfectly competitive markets and monopolistically competitive markets?

Economies of scale can lead to an oligopolistic market structure because

If a perfectly competitive firm maximises short-run profits,its marginal revenue will be positive and less than its price.

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

Figure 9-7 Figure 9-7 shows short-run cost and demand curves for a monopolistically competitive firm in the footwear market. -Refer to Figure 9-7.Which of the following statements describes the best course of action for the firm depicted in the diagram?

What is meant by the term 'government-imposed barrier to entry'? Why would a government be willing to impose barriers to entering an industry?

A characteristic found only in oligopolies is

Figure 9-12 -Refer to Figure 9-12.The firm represented in the diagram

New firms are able to enter monopolistically competitive markets because there are low barriers to entry.

An equilibrium in a game in which players pursue their own self-interest is called

A monopolistically competitive firm that is earning profits will,in the long run,experience all of the following except

Which of the following is not a barrier to entry?

What is meant by 'excess capacity'? How does it relate to consumer utility?

Economics: Foundations and Models

Trade-Offs, comparative Advantage, and the Market System

Where Prices Come From: the Interaction of Demand and Supply

Market Efficiency and Market Failure

The Economics of Healthcare

Firms,the Stock Market,and Corporate Governance

Consumer Choice and Elasticity

Technology, production, and Costs

Monopoly and Antitrust

Monopolistic Competition and Oligopoly

GDP: Measuring Total Production and Income

Unemployment and Inflation

Economic Growth, the Financial System and Business Cycles

Aggregate Demand and Aggregate Supply Analysis

Money, banks, and the Federal Reserve System

Monetary Policy

Fiscal Policy

Comparative Advantage, international Trade, and Exchange Rates

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Exam 9: Firms in Perfectly Competitive Markets

Which of the following will not happen as a consequence of a monopolistically competitive firm suffering economic losses in the short run?

If a monopolistically competitive firm has excess capacity,

A game in which each player adopts its dominant strategy

A monopolistically competitive firm chooses

What are the most important differences between perfectly competitive markets and monopolistically competitive markets?

Economies of scale can lead to an oligopolistic market structure because

If a perfectly competitive firm maximises short-run profits,its marginal revenue will be positive and less than its price.

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

Figure 9-7 Figure 9-7 shows short-run cost and demand curves for a monopolistically competitive firm in the footwear market. -Refer to Figure 9-7.Which of the following statements describes the best course of action for the firm depicted in the diagram?

What is meant by the term 'government-imposed barrier to entry'? Why would a government be willing to impose barriers to entering an industry?

A characteristic found only in oligopolies is

Figure 9-12 -Refer to Figure 9-12.The firm represented in the diagram

New firms are able to enter monopolistically competitive markets because there are low barriers to entry.

An equilibrium in a game in which players pursue their own self-interest is called

A monopolistically competitive firm that is earning profits will,in the long run,experience all of the following except

Which of the following is not a barrier to entry?

What is meant by 'excess capacity'? How does it relate to consumer utility?

Economics: Foundations and Models

Trade-Offs, comparative Advantage, and the Market System

Where Prices Come From: the Interaction of Demand and Supply

Market Efficiency and Market Failure

The Economics of Healthcare

Firms,the Stock Market,and Corporate Governance

Consumer Choice and Elasticity

Technology, production, and Costs

Monopoly and Antitrust

Monopolistic Competition and Oligopoly

GDP: Measuring Total Production and Income

Unemployment and Inflation

Economic Growth, the Financial System and Business Cycles

Aggregate Demand and Aggregate Supply Analysis

Money, banks, and the Federal Reserve System

Monetary Policy

Fiscal Policy

Comparative Advantage, international Trade, and Exchange Rates

Filters