Question 1

A monopolistic competitor in long-run equilibrium is like a perfect competitor in that

Accepted Answer

A)  price equals marginal cost. 
B)  price is greater than marginal cost. 
C)  zero economic profits are made. 
D)  both produce at the minimum points of their average total cost curves. 
A)  price equals marginal cost. 
B)  price is greater than marginal cost. 
C)  zero economic profits are made. 
D)  both produce at the minimum points of their average total cost curves.

Question 2

-In the above figure for a monopolistically competitive firm, the total revenue at the profit-maximizing point is

Accepted Answer

A)  $540. 
B)  $840. 
C)  $400. 
D)  $880. 
A)  $540. 
B)  $840. 
C)  $400. 
D)  $880.

Question 3

All of the following are advertisement methods EXCEPT

Accepted Answer

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

Question 4

A monopolistic competitor behaving in a profit-maximizing way will

Accepted Answer

A)  not advertise. 
B)  advertise as much as it can in order to increase its sales. 
C)  advertise to the point where the additional sales from advertising equal the additional marginal costs of the product. 
D)  advertise to the point where the additional revenue from one more dollar of advertising just equals the extra dollar cost of advertising. 
A)  not advertise. 
B)  advertise as much as it can in order to increase its sales. 
C)  advertise to the point where the additional sales from advertising equal the additional marginal costs of the product. 
D)  advertise to the point where the additional revenue from one more dollar of advertising just equals the extra dollar cost of advertising.

Question 5

Which of the following is NOT a characteristic of monopolistic competition?

Accepted Answer

A)  product differentiation 
B)  a large number of entry barriers 
C)  advertising 
D)  a significant number of sellers 
A)  product differentiation 
B)  a large number of entry barriers 
C)  advertising 
D)  a significant number of sellers

Question 6

For a firm that sells an information product, the long-run equilibrium exists at a point where

Accepted Answer

A)  price equals average total cost. 
B)  price equals average variable cost. 
C)  price equals average fixed cost. 
D)  price equals marginal cost. 
A)  price equals average total cost. 
B)  price equals average variable cost. 
C)  price equals average fixed cost. 
D)  price equals marginal cost.

Question 7

A good with qualities that consumers lack the experience to assess without assistance is called

Accepted Answer

A)  a credence good. 
B)  a search good. 
C)  an experience good. 
D)  a persuasive good. 
A)  a credence good. 
B)  a search good. 
C)  an experience good. 
D)  a persuasive good.

Question 8

An experience good is a product

Accepted Answer

A)  with qualities that consumers lack the expertise to assess without assistance. 
B)  that emphasizes the features of its product. 
C)  with characteristics that enable an individual to evaluate the product's quality in advance of a purchase. 
D)  that an individual must consume before the quality can be established. 
A)  with qualities that consumers lack the expertise to assess without assistance. 
B)  that emphasizes the features of its product. 
C)  with characteristics that enable an individual to evaluate the product's quality in advance of a purchase. 
D)  that an individual must consume before the quality can be established.

Question 9

-Refer to the above figure. Which of the following statements about panel D in the figure is TRUE?

Accepted Answer

A)  The figure represents a long-run equilibrium for a monopolistic competitor. 
B)  The figure represents an industry long-run equilibrium for monopolistic competition. 
C)  The figure is in error since it doesn't show the monopolistic competitor making profits in the long run. 
D)  The figure is in error since it has marginal cost intersecting the ATC curve at a point other than the minimum of ATC. 
A)  The figure represents a long-run equilibrium for a monopolistic competitor. 
B)  The figure represents an industry long-run equilibrium for monopolistic competition. 
C)  The figure is in error since it doesn't show the monopolistic competitor making profits in the long run. 
D)  The figure is in error since it has marginal cost intersecting the ATC curve at a point other than the minimum of ATC.

Question 10

Because there are low barriers to entry in a monopolistically competitive market

Accepted Answer

A)  there are many firms in the industry. 
B)  they produce a homogeneous product. 
C)  the firms are price takers. 
D)  there is no non-price competition. 
A)  there are many firms in the industry. 
B)  they produce a homogeneous product. 
C)  the firms are price takers. 
D)  there is no non-price competition.

Question 11

-Refer to the above figure. The profit maximizing price for a monopolistic competitor is

Accepted Answer

A)  P1. 
B)  P2. 
C)  P3. 
D)  P4. 
A)  P1. 
B)  P2. 
C)  P3. 
D)  P4.

Question 12

Steve can tell if his car has been fixed or not-it works, or it doesn't-but he cannot tell how it was fixed. The car repair is a(n)

Accepted Answer

A)  experience good. 
B)  credence good. 
C)  luxury good. 
D)  search good. 
A)  experience good. 
B)  credence good. 
C)  luxury good. 
D)  search good.

Question 13

In order to differentiate their product brands from those of competing firms, monopolistically competitive firms

Accepted Answer

A)  equate marginal cost to marginal revenue to determine the profit maximizing quantity. 
B)  spread false rumors about their competitors. 
C)  take their competitor's reactions to changes in their policies into account. 
D)  advertise their product. 
A)  equate marginal cost to marginal revenue to determine the profit maximizing quantity. 
B)  spread false rumors about their competitors. 
C)  take their competitor's reactions to changes in their policies into account. 
D)  advertise their product.

Question 14

Which of the following statements about a monopolistically competitive firm is TRUE?

Accepted Answer

A)  A monopolistically competitive firm does not always equate marginal cost to marginal revenue because it uses other means to maximize profits. 
B)  A monopolistically competitive firm maximizes profits by charging a price equal to marginal cost. 
C)  A monopolistically competitive firm produces the quantity at the point at which the demand curve crosses the marginal cost curve. 
D)  A monopolistically competitive firm maximizes profits when it produces the quantity at which marginal cost equals marginal revenue. 
A)  A monopolistically competitive firm does not always equate marginal cost to marginal revenue because it uses other means to maximize profits. 
B)  A monopolistically competitive firm maximizes profits by charging a price equal to marginal cost. 
C)  A monopolistically competitive firm produces the quantity at the point at which the demand curve crosses the marginal cost curve. 
D)  A monopolistically competitive firm maximizes profits when it produces the quantity at which marginal cost equals marginal revenue.

Question 15

Which of the following is NOT a feature of monopolistic competition?

Accepted Answer

A)  significant numbers of sellers in a highly competitive market 
B)  differentiated products 
C)  sales promotion and advertising 
D)  inability of firms to enter or exit the market 
A)  significant numbers of sellers in a highly competitive market 
B)  differentiated products 
C)  sales promotion and advertising 
D)  inability of firms to enter or exit the market

Question 16

A monopolistic competitor will maximize its profits at the output level at which

Accepted Answer

A)  TC = TR. 
B)  MC = MR. 
C)  the MC curve intersects the demand curve. 
D)  MR = ATC. 
A)  TC = TR. 
B)  MC = MR. 
C)  the MC curve intersects the demand curve. 
D)  MR = ATC.

Question 17

The distinguishing of products by brand name, color, and other attributes

Accepted Answer

A)  is known as interdependence. 
B)  is known as product differentiation. 
C)  leads to many firms in the market. 
D)  leads to collusion. 
A)  is known as interdependence. 
B)  is known as product differentiation. 
C)  leads to many firms in the market. 
D)  leads to collusion.

Question 18

-Refer to the above figure. Which panel does NOT represent a possible short-run situation for a monopolistically competitive firm?

Accepted Answer

A)  Panel A 
B)  Panel B 
C)  Panel C 
D)  Panel D 
A)  Panel A 
B)  Panel B 
C)  Panel C 
D)  Panel D

Question 19

The brand name of a firm

Accepted Answer

A)  has nothing to do with the profitability of a firm. 
B)  has been considered irrelevant by economists since profits for a monopolistic competitive firm are zero in the long-run. 
C)  relates to consumers' perception of product differentiation and to the market value of a firm. 
D)  is important in the short-run but not in the long-run. 
A)  has nothing to do with the profitability of a firm. 
B)  has been considered irrelevant by economists since profits for a monopolistic competitive firm are zero in the long-run. 
C)  relates to consumers' perception of product differentiation and to the market value of a firm. 
D)  is important in the short-run but not in the long-run.

Question 20

Explain how information products are "special."

Accepted Answer

Producing an information product entails

Exam 25: Monopolistic Competition

A monopolistic competitor in long-run equilibrium is like a perfect competitor in that

-In the above figure for a monopolistically competitive firm, the total revenue at the profit-maximizing point is

All of the following are advertisement methods EXCEPT

A monopolistic competitor behaving in a profit-maximizing way will

Which of the following is NOT a characteristic of monopolistic competition?

For a firm that sells an information product, the long-run equilibrium exists at a point where

A good with qualities that consumers lack the experience to assess without assistance is called

An experience good is a product

-Refer to the above figure. Which of the following statements about panel D in the figure is TRUE?

Because there are low barriers to entry in a monopolistically competitive market

-Refer to the above figure. The profit maximizing price for a monopolistic competitor is

Steve can tell if his car has been fixed or not-it works, or it doesn't-but he cannot tell how it was fixed. The car repair is a(n)

In order to differentiate their product brands from those of competing firms, monopolistically competitive firms

Which of the following statements about a monopolistically competitive firm is TRUE?

Which of the following is NOT a feature of monopolistic competition?

A monopolistic competitor will maximize its profits at the output level at which

The distinguishing of products by brand name, color, and other attributes

-Refer to the above figure. Which panel does NOT represent a possible short-run situation for a monopolistically competitive firm?

The brand name of a firm

Explain how information products are "special."

The Nature of Economics

Scarcity and the World of Trade-Offs

Demand and Supply

Extensions of Demand and Supply Analysis

Public Spending and Public Choice

Funding the Public Sector

The Macroeconomy: Unemployment, Inflation, and Deflation

Measuring the Economys Performance

Global Economic Growth and Development

Real GDP and the Price Level in the Long Run

Classical and Keynesian Macro Analyses

Consumption, Real GDP, and the Multiplier

Fiscal Policy

Deficit Spending and the Public Debt

Money, Banking, and Central Banking

Domestic and International Dimensions of Monetary Policy

Stabilization in an Integrated World Economy

Policies and Prospects for Global Economic Growth

Demand and Supply Elasticity

Consumer Choice

Rents, Profits, and the Financial Environment of Business

The Firm: Cost and Output Determination

Perfect Competition

Monopoly

Oligopoly and Strategic Behavior

Regulation and Antitrust Policy in a Globalized Economy

The Labor Market: Demand, Supply and Outsourcing

Unions and Labor Market Monopoly Power

Income, Poverty, and Health Care

Environmental Economics

Comparative Advantage and the Open Economy

Exchange Rates and the Balance of Payments

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