Question 1

In the long run, a monopolistically competitive firm will set P = MC.

Accepted Answer

A) True 
 B)False

Question 2

Under monopolistic competition, small inefficiencies are the price we pay to get greater variety and innovation.

Accepted Answer

A) True 
 B)False

Question 3

A monopolistic competitive firm is able to charge P > MC because its product is slightly different from the product of other firms.

Accepted Answer

A) True 
 B)False

Question 4

Persuasive advertising is wasteful advertising and does nothing to affect overall demand for the product.

Accepted Answer

A) True 
 B)False

Question 5

Persuasive ads:

Accepted Answer

A)  make people feel good about a product, and this is potentially valuable. 
B)  lower the enjoyment people have for products. 
C)  make people unambiguously worse off. 
D)  generally do not succeed in persuading people. 
A)  make people feel good about a product, and this is potentially valuable. 
B)  lower the enjoyment people have for products. 
C)  make people unambiguously worse off. 
D)  generally do not succeed in persuading people.

Question 6

On average, advertising makes consumers worse off by raising prices.

Accepted Answer

A) True 
 B)False

Question 7

A monopolistically competitive firm operates where MR = MC.

Accepted Answer

A) True 
 B)False

Question 8

Monopolistically competitive firms earn zero profits on average because:

Accepted Answer

A)  they price above marginal cost. 
B)  new firms cannot enter the market. 
C)  positive profits cause competitors to enter the market, decreasing demand for each individual firm. 
D)  they price at marginal cost. 
A)  they price above marginal cost. 
B)  new firms cannot enter the market. 
C)  positive profits cause competitors to enter the market, decreasing demand for each individual firm. 
D)  they price at marginal cost.

Question 9

Which of the following is/are TRUE of monopolistic competition?
I. Monopolistic competitive firms do not produce at the minimum of their average cost curves.
II. Monopolistic competitive firms produce at the minimum of their average cost curves.
III. Monopolistic competitive firms earn higher profits than monopolies.

Accepted Answer

A)  I only 
B)  II only 
C)  I and III only 
D)  II and III only 
A)  I only 
B)  II only 
C)  I and III only 
D)  II and III only

Question 10

Why might the benefits of monopolistic competition outweigh the inefficiencies?

Accepted Answer

A)  Monopolistic competition has higher deadweight loss than monopoly. 
B)  In monopolistic competition, firms do not produce at their minimum average cost. 
C)  In monopolistic competition, firms do not price at marginal cost. 
D)  If we had perfect competition instead of monopolistic competition, we would not have all the variety and innovation that we have today. 
A)  Monopolistic competition has higher deadweight loss than monopoly. 
B)  In monopolistic competition, firms do not produce at their minimum average cost. 
C)  In monopolistic competition, firms do not price at marginal cost. 
D)  If we had perfect competition instead of monopolistic competition, we would not have all the variety and innovation that we have today.

Question 11

Sometimes advertising is simply about trying to change our minds. An example of this with respect to Coca-Cola include the following previous slogans:
I. The pause that refreshes.
II. Coca-Cola hits the spot, for only a nickel you get a lot.
III. Things go better with Coca-Cola.

Accepted Answer

A)  I and II only 
B)  I and III only 
C)  II and III only 
D)  I, II, and III 
A)  I and II only 
B)  I and III only 
C)  II and III only 
D)  I, II, and III

Question 12

What are the features that describe monopolistic competition?

Accepted Answer

(1) Many sellers, (2

Question 13

As of 2010 it was more common to see advertisements for the iPad in Berlin than in Virginia. Explain.

Accepted Answer

The iPad is not as well known in Berlin

In the long run, a monopolistically competitive firm will set P = MC.

Under monopolistic competition, small inefficiencies are the price we pay to get greater variety and innovation.

A monopolistic competitive firm is able to charge P > MC because its product is slightly different from the product of other firms.

Persuasive advertising is wasteful advertising and does nothing to affect overall demand for the product.

Persuasive ads:

On average, advertising makes consumers worse off by raising prices.

A monopolistically competitive firm operates where MR = MC.

Monopolistically competitive firms earn zero profits on average because:

Why might the benefits of monopolistic competition outweigh the inefficiencies?

Sometimes advertising is simply about trying to change our minds. An example of this with respect to Coca-Cola include the following previous slogans: I. The pause that refreshes. II. Coca-Cola hits the spot, for only a nickel you get a lot. III. Things go better with Coca-Cola.

What are the features that describe monopolistic competition?

As of 2010 it was more common to see advertisements for the iPad in Berlin than in Virginia. Explain.

The Big Ideas

The Power of Trade and Comparative

Supply and Demand

Equilibrium

Elasticity and Its Applications

Taxes and Subsidies

The Price System

Price Ceilings and Floors

International Trade

Externalities- When the Price Is Not Right

Costs and Profit Maximization Under Competition

Competition and the Invisible Hand

Monopoly

Price Discrimination

Oligopoly and Game Theory

Competing for Monopoly

Labor Markets

Public Goods and the Tragedy of the Commons

Political Economy and Public Choice

Economics, Ethics, and Public Policy

Managing Incentives

Stock Markets and Personal Finance

Price Discrimination

Consumer Choice

Filters

Exam 17: Monopolistic Competition and Advertising

In the long run, a monopolistically competitive firm will set P = MC.

Under monopolistic competition, small inefficiencies are the price we pay to get greater variety and innovation.

A monopolistic competitive firm is able to charge P > MC because its product is slightly different from the product of other firms.

Persuasive advertising is wasteful advertising and does nothing to affect overall demand for the product.

Persuasive ads:

On average, advertising makes consumers worse off by raising prices.

A monopolistically competitive firm operates where MR = MC.

Monopolistically competitive firms earn zero profits on average because:

Why might the benefits of monopolistic competition outweigh the inefficiencies?

Sometimes advertising is simply about trying to change our minds. An example of this with respect to Coca-Cola include the following previous slogans: I. The pause that refreshes. II. Coca-Cola hits the spot, for only a nickel you get a lot. III. Things go better with Coca-Cola.

What are the features that describe monopolistic competition?

As of 2010 it was more common to see advertisements for the iPad in Berlin than in Virginia. Explain.

The Big Ideas

The Power of Trade and Comparative

Supply and Demand

Equilibrium

Elasticity and Its Applications

Taxes and Subsidies

The Price System

Price Ceilings and Floors

International Trade

Externalities- When the Price Is Not Right

Costs and Profit Maximization Under Competition

Competition and the Invisible Hand

Monopoly

Price Discrimination

Oligopoly and Game Theory

Competing for Monopoly

Labor Markets

Public Goods and the Tragedy of the Commons

Political Economy and Public Choice

Economics, Ethics, and Public Policy

Managing Incentives

Stock Markets and Personal Finance

Price Discrimination

Consumer Choice

Filters