Question 1

Firms that sell information products experience relatively high fixed costs but, once they have produced the first unit, can

Accepted Answer

A)  sell additional units at a loss, or above cost. 
B)  provide expensive information products to consumers. 
C)  sell additional units at a relatively low cost per unit. 
D)  experience short-run diseconomies of scale. 
A)  sell additional units at a loss, or above cost. 
B)  provide expensive information products to consumers. 
C)  sell additional units at a relatively low cost per unit. 
D)  experience short-run diseconomies of scale.

Question 2

The demand for the product of a monopolistically competitive firm is highly elastic when

Accepted Answer

A)  firms collude. 
B)  there are fewer firms in the industry. 
C)  there is a lot of product differentiation. 
D)  there are a lot of close substitutes. 
A)  firms collude. 
B)  there are fewer firms in the industry. 
C)  there is a lot of product differentiation. 
D)  there are a lot of close substitutes.

Question 3

The monopolistic competitive firm in short-run equilibrium may experience economic profits that are

Accepted Answer

A)  always zero. 
B)  greater than, equal to, or less than zero. 
C)  always positive. 
D)  always negative. 
A)  always zero. 
B)  greater than, equal to, or less than zero. 
C)  always positive. 
D)  always negative.

Question 4

Mass marketing involves

Accepted Answer

A)  using all types of media, such as television and radio, to reach as many consumers as possible. 
B)  Internet ads only. 
C)  using direct mailings only. 
D)  lower-cost methods of advertising. 
A)  using all types of media, such as television and radio, to reach as many consumers as possible. 
B)  Internet ads only. 
C)  using direct mailings only. 
D)  lower-cost methods of advertising.

Question 5

How is monopolistic competition like perfect competition? How is it like monopoly?

Accepted Answer

Monopolistic competition is like perfect

Question 6

The long-run equilibrium of monopolistic competition is characterized by

Accepted Answer

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

Question 7

The main objective of advertising for a monopolistically competitive firm is

Accepted Answer

A)  to differentiate the product and raise sales. 
B)  to reduce cost. 
C)  to earn long run profits. 
D)  to comply with government requirements on product information. 
A)  to differentiate the product and raise sales. 
B)  to reduce cost. 
C)  to earn long run profits. 
D)  to comply with government requirements on product information.

Question 8

In a monopolistically competitive market, a firm should advertise to the point at which

Accepted Answer

A)  it is selling the most units it can possibly sell. 
B)  the extra revenue from an additional dollar spent on advertising just equals the marginal cost of producing one more unit of the good. 
C)  the additional revenue generated by one more dollar of advertising just equals the extra dollar cost of advertising. 
D)  it can raise price to the highest level possible. 
A)  it is selling the most units it can possibly sell. 
B)  the extra revenue from an additional dollar spent on advertising just equals the marginal cost of producing one more unit of the good. 
C)  the additional revenue generated by one more dollar of advertising just equals the extra dollar cost of advertising. 
D)  it can raise price to the highest level possible.

Question 9

Advertising is used by firms in a monopolistic competitive industry to

Accepted Answer

A)  differentiate their product from those of competitors. 
B)  increase brand loyalty. 
C)  increase demands for their individual products. 
D)  all of the above. 
A)  differentiate their product from those of competitors. 
B)  increase brand loyalty. 
C)  increase demands for their individual products. 
D)  all of the above.

Question 10

Advertising by monopolistically competitive firms can do all of the following EXCEPT

Accepted Answer

A)  lower the consumer's purchase price. 
B)  help differentiate a firm's product. 
C)  act as a signal to consumers that the company is serious about staying in business. 
D)  result in increased profits for the advertising firm. 
A)  lower the consumer's purchase price. 
B)  help differentiate a firm's product. 
C)  act as a signal to consumers that the company is serious about staying in business. 
D)  result in increased profits for the advertising firm.

Question 11

Monopolistic competition and perfect competition are different in that

Accepted Answer

A)  only monopolistically competitive firms advertise. 
B)  only monopolistically competitive firms can earn economic losses in the short-run. 
C)  only perfectly competitive firms maximize profits where marginal revenue equals marginal cost. 
D)  only perfectly competitive firms are characterized by long-run economic profits of zero. 
A)  only monopolistically competitive firms advertise. 
B)  only monopolistically competitive firms can earn economic losses in the short-run. 
C)  only perfectly competitive firms maximize profits where marginal revenue equals marginal cost. 
D)  only perfectly competitive firms are characterized by long-run economic profits of zero.

Question 12

In a monopolistically competitive market if the additional revenue generated from advertising equals the additional cost of advertising, the firm should

Accepted Answer

A)  advertise more to increase sales. 
B)  advertise more to lower marginal costs. 
C)  maintain its current amount of advertising. 
D)  advertise less to decrease costs. 
A)  advertise more to increase sales. 
B)  advertise more to lower marginal costs. 
C)  maintain its current amount of advertising. 
D)  advertise less to decrease costs.

Question 13

Jaime has just researched and purchased a book through the Internet as a result of responding directly to a ad on Facebook. The Facebook ad is an example of

Accepted Answer

A)  mass marketing. 
B)  direct marketing. 
C)  indirect marketing. 
D)  interactive marketing. 
A)  mass marketing. 
B)  direct marketing. 
C)  indirect marketing. 
D)  interactive marketing.

Question 14

According to Edward Chamberlin, is the "differentness" of products a waste of resources? Explain.

Accepted Answer

According to Chamberlin, the "differentn

Question 15

Which of the following statements is INCORRECT regarding the properties of information products?

Accepted Answer

A)  Providing an information product entails incurring relatively high fixed costs. 
B)  The average total cost curve for a firm that sells an information product slopes upward. 
C)  The firm experiences economies of operation in the short run. 
D)  In the long run, the producer earns sufficient revenue to cover the opportunity cost of capital. 
A)  Providing an information product entails incurring relatively high fixed costs. 
B)  The average total cost curve for a firm that sells an information product slopes upward. 
C)  The firm experiences economies of operation in the short run. 
D)  In the long run, the producer earns sufficient revenue to cover the opportunity cost of capital.

Question 16

An implication of the downward slope of the demand curve for a monopolistic competitive firm is that

Accepted Answer

A)  its marginal revenue curve slopes upward. 
B)  its marginal revenue curve is the same as the demand curve. 
C)  its marginal revenue curve slopes downward but lies above the demand curve. 
D)  its marginal revenue curve slopes downward but lies below the demand curve. 
A)  its marginal revenue curve slopes upward. 
B)  its marginal revenue curve is the same as the demand curve. 
C)  its marginal revenue curve slopes downward but lies above the demand curve. 
D)  its marginal revenue curve slopes downward but lies below the demand curve.

Question 17

Advertising that is intended to alter a consumer's tastes and preferences and induce the customer to purchase a particular product is

Accepted Answer

A)  persuasive advertising. 
B)  educational advertising. 
C)  informational advertising. 
D)  directional advertising. 
A)  persuasive advertising. 
B)  educational advertising. 
C)  informational advertising. 
D)  directional advertising.

Question 18

Because the short-run average total cost curve slopes downward for an information product, the firm experiences

Accepted Answer

A)  a downward sloping marginal cost curve. 
B)  a downward sloping average variable cost curve. 
C)  short-run economies of operation. 
D)  long-run diseconomies of scale. 
A)  a downward sloping marginal cost curve. 
B)  a downward sloping average variable cost curve. 
C)  short-run economies of operation. 
D)  long-run diseconomies of scale.

Question 19

-Use the above figure. The total profit earned by this monopolistically competitive firm is

Accepted Answer

A)  $2,560. 
B)  $1,600. 
C)  $480. 
D)  $1,900. 
A)  $2,560. 
B)  $1,600. 
C)  $480. 
D)  $1,900.

Question 20

The providers of information products typically

Accepted Answer

A)  have low fixed costs. 
B)  have high marginal costs. 
C)  have high fixed costs. 
D)  have zero fixed costs. 
A)  have low fixed costs. 
B)  have high marginal costs. 
C)  have high fixed costs. 
D)  have zero fixed costs.

Exam 25: Monopolistic Competition

Firms that sell information products experience relatively high fixed costs but, once they have produced the first unit, can

The demand for the product of a monopolistically competitive firm is highly elastic when

The monopolistic competitive firm in short-run equilibrium may experience economic profits that are

Mass marketing involves

How is monopolistic competition like perfect competition? How is it like monopoly?

The long-run equilibrium of monopolistic competition is characterized by

The main objective of advertising for a monopolistically competitive firm is

In a monopolistically competitive market, a firm should advertise to the point at which

Advertising is used by firms in a monopolistic competitive industry to

Advertising by monopolistically competitive firms can do all of the following EXCEPT

Monopolistic competition and perfect competition are different in that

In a monopolistically competitive market if the additional revenue generated from advertising equals the additional cost of advertising, the firm should

Jaime has just researched and purchased a book through the Internet as a result of responding directly to a ad on Facebook. The Facebook ad is an example of

According to Edward Chamberlin, is the "differentness" of products a waste of resources? Explain.

Which of the following statements is INCORRECT regarding the properties of information products?

An implication of the downward slope of the demand curve for a monopolistic competitive firm is that

Advertising that is intended to alter a consumer's tastes and preferences and induce the customer to purchase a particular product is

Because the short-run average total cost curve slopes downward for an information product, the firm experiences

-Use the above figure. The total profit earned by this monopolistically competitive firm is

The providers of information products typically

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