Question 1

Informational advertising is mostly used for

Accepted Answer

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

Question 2

-In the above figure, the profit-maximizing output and price for this monopolistically competitive firm are

Accepted Answer

A)  10,000 units at a price of $10 per unit. 
B)  10,000 units at a price of $5 per unit. 
C)  13,000 units at a price of $7 per unit. 
D)  12,000 units at a price of $8 per unit. 
A)  10,000 units at a price of $10 per unit. 
B)  10,000 units at a price of $5 per unit. 
C)  13,000 units at a price of $7 per unit. 
D)  12,000 units at a price of $8 per unit.

Question 3

Informational advertising is the type of advertising that

Accepted Answer

A)  is used exclusively on television. 
B)  is used exclusively on radio. 
C)  emphasizes the features of a product. 
D)  is used to influence a consumer's tastes and preferences. 
A)  is used exclusively on television. 
B)  is used exclusively on radio. 
C)  emphasizes the features of a product. 
D)  is used to influence a consumer's tastes and preferences.

Question 4

If a customer buys an airline ticket based only on the price of the ticket, then the airline ticket is a(n)

Accepted Answer

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

Question 5

A very high fixed cost and a relatively low marginal cost is associated with

Accepted Answer

A)  every type of good or product. 
B)  an information product. 
C)  a persuasive good. 
D)  an experience good. 
A)  every type of good or product. 
B)  an information product. 
C)  a persuasive good. 
D)  an experience good.

Question 6

The first unit of an information product is produced at a high fixed cost. Producing additional units entails relatively

Accepted Answer

A)  high average variable cost. 
B)  low marginal cost. 
C)  low external cost. 
D)  high social cost. 
A)  high average variable cost. 
B)  low marginal cost. 
C)  low external cost. 
D)  high social cost.

Question 7

In both a monopolistically competitive market and a pure monopoly market, firms

Accepted Answer

A)  can make long-run profits. 
B)  set price greater than marginal cost. 
C)  are protected by entry barriers. 
D)  advertise extensively. 
A)  can make long-run profits. 
B)  set price greater than marginal cost. 
C)  are protected by entry barriers. 
D)  advertise extensively.

Question 8

Which of the following is FALSE with respect to brand names and advertising?

Accepted Answer

A)  Because "differentness" has value to customers, monopolistically competitive firms regard their brand names as valuable. 
B)  Firms use trademarks-words, symbols, and logos-to distinguish their product brands. 
C)  Companies do not regard their brands as valuable private (intellectual) property because the value cannot be quantified. 
D)  There is considerable shifting over time in the market value rankings of various U.S. product brands. 
A)  Because "differentness" has value to customers, monopolistically competitive firms regard their brand names as valuable. 
B)  Firms use trademarks-words, symbols, and logos-to distinguish their product brands. 
C)  Companies do not regard their brands as valuable private (intellectual) property because the value cannot be quantified. 
D)  There is considerable shifting over time in the market value rankings of various U.S. product brands.

Question 9

A good example of a monopolistic competitive industry is

Accepted Answer

A)  the restaurant industry. 
B)  the public utility industry. 
C)  the computer game industry. 
D)  diamond mining. 
A)  the restaurant industry. 
B)  the public utility industry. 
C)  the computer game industry. 
D)  diamond mining.

Question 10

If the producer of an information product engages in marginal cost pricing, it earns

Accepted Answer

A)  a normal profit. 
B)  an economic loss. 
C)  zero economic profits. 
D)  positive economic profits. 
A)  a normal profit. 
B)  an economic loss. 
C)  zero economic profits. 
D)  positive economic profits.

Question 11

Which will be TRUE for a monopolistic competitor experiencing short-run losses?

Accepted Answer

A) P > ATC B) P = ATC C) P < ATC D) P < MC A) P > ATC B) P = ATC C) P < ATC D) P < MC

Question 12

The demand curve for the product of a monopolistically competitive firm slopes downward because

Accepted Answer

A)  products are perceived by consumers as different. 
B)  products are homogeneous. 
C)  people only care about price when they buy a good. 
D)  the firm's goal is to maximize profits. 
A)  products are perceived by consumers as different. 
B)  products are homogeneous. 
C)  people only care about price when they buy a good. 
D)  the firm's goal is to maximize profits.

Question 13

The greater the the number and closeness of substitutes available between monopolistically competitive firms

Accepted Answer

A)  the greater the ability of a firm to raise its price above the price of close substitutes. 
B)  the smaller the ability of a firm to raise its price above the price of close substitutes. 
C)  the more inelastic the demand curve. 
D)  the greater the positive economic profits for a single firm. 
A)  the greater the ability of a firm to raise its price above the price of close substitutes. 
B)  the smaller the ability of a firm to raise its price above the price of close substitutes. 
C)  the more inelastic the demand curve. 
D)  the greater the positive economic profits for a single firm.

Question 14

When you see an advertisement on TV for a hair care product in which the actor using the product is depicted as beautiful and happy, this is

Accepted Answer

A)  informational advertising. 
B)  direct market advertising. 
C)  indirect market advertising. 
D)  persuasive advertising. 
A)  informational advertising. 
B)  direct market advertising. 
C)  indirect market advertising. 
D)  persuasive advertising.

Question 15

If firms in a monopolistically competitive industry are operating with positive economic profit, over time we would see

Accepted Answer

A)  firms alter their advertising rates until they made at least normal profits. 
B)  some firms entering the industry, causing the market supply curve to shift to the right, lowering price. 
C)  some firms entering the industry, causing the demand curves of the existing firms to shift to the left. 
D)  some firms entering the industry, causing the demand curves of the existing firms to shift to the right. 
A)  firms alter their advertising rates until they made at least normal profits. 
B)  some firms entering the industry, causing the market supply curve to shift to the right, lowering price. 
C)  some firms entering the industry, causing the demand curves of the existing firms to shift to the left. 
D)  some firms entering the industry, causing the demand curves of the existing firms to shift to the right.

Question 16

Which of the following conditions best explain the short-run economies of operation associated with production of an information product?

Accepted Answer

A)  AVC slopes downward, and AFC is constant, so that ATC slopes downward. 
B)  AVC is constant, and AFC slopes downward, so that ATC slopes downward. 
C)  AFC is constant, and MC slopes downward, so that AVC slopes downward. 
D)  MC is constant, and MC slopes upward, so that AVC slopes upward. 
A)  AVC slopes downward, and AFC is constant, so that ATC slopes downward. 
B)  AVC is constant, and AFC slopes downward, so that ATC slopes downward. 
C)  AFC is constant, and MC slopes downward, so that AVC slopes downward. 
D)  MC is constant, and MC slopes upward, so that AVC slopes upward.

Question 17

The number of firms in a monopolistically competitive market means that

Accepted Answer

A)  all firms will have substantial monopoly power since there are so few firms in the industry. 
B)  each firm has a relatively small share of the total market since there are many firms in the industry. 
C)  the firms will be likely to collude since there are only a few firms in the industry. 
D)  firms will have a hard time earning non-negative profits since there are many firms in the industry. 
A)  all firms will have substantial monopoly power since there are so few firms in the industry. 
B)  each firm has a relatively small share of the total market since there are many firms in the industry. 
C)  the firms will be likely to collude since there are only a few firms in the industry. 
D)  firms will have a hard time earning non-negative profits since there are many firms in the industry.

Question 18

-Refer to the above figure. Which panels represent long run equilibrium for the perfectly competitive firm and monopolistic competitive firm, respectively?

Accepted Answer

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

Question 19

Average fixed cost for an information product would

Accepted Answer

A)  first decrease and then increase as quantity increases. 
B)  increase constantly as quantity increases. 
C)  decrease constantly as quantity increases. 
D)  remain constant as quantity increases. 
A)  first decrease and then increase as quantity increases. 
B)  increase constantly as quantity increases. 
C)  decrease constantly as quantity increases. 
D)  remain constant as quantity increases.

Question 20

A credence 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.

Exam 25: Monopolistic Competition

Informational advertising is mostly used for

-In the above figure, the profit-maximizing output and price for this monopolistically competitive firm are

Informational advertising is the type of advertising that

If a customer buys an airline ticket based only on the price of the ticket, then the airline ticket is a(n)

A very high fixed cost and a relatively low marginal cost is associated with

The first unit of an information product is produced at a high fixed cost. Producing additional units entails relatively

In both a monopolistically competitive market and a pure monopoly market, firms

Which of the following is FALSE with respect to brand names and advertising?

A good example of a monopolistic competitive industry is

If the producer of an information product engages in marginal cost pricing, it earns

Which will be TRUE for a monopolistic competitor experiencing short-run losses?

The demand curve for the product of a monopolistically competitive firm slopes downward because

The greater the the number and closeness of substitutes available between monopolistically competitive firms

When you see an advertisement on TV for a hair care product in which the actor using the product is depicted as beautiful and happy, this is

If firms in a monopolistically competitive industry are operating with positive economic profit, over time we would see

Which of the following conditions best explain the short-run economies of operation associated with production of an information product?

The number of firms in a monopolistically competitive market means that

-Refer to the above figure. Which panels represent long run equilibrium for the perfectly competitive firm and monopolistic competitive firm, respectively?

Average fixed cost for an information product would

A credence good is a product

The Nature of Economics

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