Question 1

A good that has qualities that are easy for a consumer to assess in advance of a purchase 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 2

Which of the following is FALSE about a comparison between a perfectly competitive firm and a monopolistically competitive firm?

Accepted Answer

A)  A perfectly competitive firm has a horizontal demand curve, while a monopolistically competitive firm has a downward sloping demand curve. 
B)  In the short run, a perfectly competitive firm will earn zero economic profits, while a monopolistically competitive firm will earn positive economic profits. 
C)  Both the perfectly competitive and monopolistically competitive firm will earn economic profits equal to zero in the long-run. 
D)  In the long run, the perfectly competitive firm will produce at the minimum of the average total cost curve, while the monopolistically competitive firm will produce to the left of the minimum of the average total cost curve. 
A)  A perfectly competitive firm has a horizontal demand curve, while a monopolistically competitive firm has a downward sloping demand curve. 
B)  In the short run, a perfectly competitive firm will earn zero economic profits, while a monopolistically competitive firm will earn positive economic profits. 
C)  Both the perfectly competitive and monopolistically competitive firm will earn economic profits equal to zero in the long-run. 
D)  In the long run, the perfectly competitive firm will produce at the minimum of the average total cost curve, while the monopolistically competitive firm will produce to the left of the minimum of the average total cost curve.

Question 3

An information product typically has

Accepted Answer

A)  high total fixed costs and high marginal costs. 
B)  low total fixed costs and low marginal costs. 
C)  low total fixed costs and high marginal costs. 
D)  high total fixed costs and low marginal costs. 
A)  high total fixed costs and high marginal costs. 
B)  low total fixed costs and low marginal costs. 
C)  low total fixed costs and high marginal costs. 
D)  high total fixed costs and low marginal costs.

Question 4

Which of the following is most likely to be a monopolistically competitive firm?

Accepted Answer

A)  a soybean farmer 
B)  a lettuce farmer 
C)  a municipal water district 
D)  a fast food restaurant 
A)  a soybean farmer 
B)  a lettuce farmer 
C)  a municipal water district 
D)  a fast food restaurant

Question 5

All of the following are characteristics of a monopolistically competitive industry EXCEPT

Accepted Answer

A)  homogeneous products. 
B)  many firms. 
C)  low barriers to entry and exit. 
D)  sales promotion and advertising. 
A)  homogeneous products. 
B)  many firms. 
C)  low barriers to entry and exit. 
D)  sales promotion and advertising.

Question 6

For a monopolistically competitive firm

Accepted Answer

A)  price equals marginal revenue at all levels of output. 
B)  price is less than marginal revenue at all levels of output. 
C)  price is greater than marginal revenue at all levels of output except for the first unit. 
D)  the demand curve is perfectly inelastic and marginal revenue is zero. 
A)  price equals marginal revenue at all levels of output. 
B)  price is less than marginal revenue at all levels of output. 
C)  price is greater than marginal revenue at all levels of output except for the first unit. 
D)  the demand curve is perfectly inelastic and marginal revenue is zero.

Question 7

The demand curve for the product of a monopolistically competitive firm

Accepted Answer

A)  is perfectly elastic. 
B)  is unitary elastic. 
C)  is downward sloping. 
D)  is perfectly inelastic. 
A)  is perfectly elastic. 
B)  is unitary elastic. 
C)  is downward sloping. 
D)  is perfectly inelastic.

Question 8

-Use the above figure. The economic profit for this firm is

Accepted Answer

A)  zero. 
B)  the distance between T and E. 
C)  the distance between E and x-axis. 
D)  the distance between T and x-axis. 
A)  zero. 
B)  the distance between T and E. 
C)  the distance between E and x-axis. 
D)  the distance between T and x-axis.

Question 9

Advertising intended to induce a consumer to discover a previously unknown taste or preference is

Accepted Answer

A)  persuasive advertising. 
B)  informational advertising. 
C)  direct advertising. 
D)  mass marketing advertising. 
A)  persuasive advertising. 
B)  informational advertising. 
C)  direct advertising. 
D)  mass marketing advertising.

Question 10

When a pharmaceutical company advertises that its allergy medication is clinically proven to alleviate hay fever symptoms, the pharmaceutical company is engaging in

Accepted Answer

A)  informational advertising. 
B)  trademark protection. 
C)  persuasive advertising. 
D)  direct marketing. 
A)  informational advertising. 
B)  trademark protection. 
C)  persuasive advertising. 
D)  direct marketing.

Question 11

Why is it that a monopolistically competitive firm cannot earn positive economic profits in the long run?

Accepted Answer

A monopolistically competitive firm can

Question 12

A computer game is an example of

Accepted Answer

A)  a free product. 
B)  an information product. 
C)  a search product. 
D)  a credibility product. 
A)  a free product. 
B)  an information product. 
C)  a search product. 
D)  a credibility product.

Question 13

Why would Sunkist incur substantial costs to advertise and establish a brand name when the quality of its oranges can easily be evaluated by consumers?

Accepted Answer

Oranges might be considered as experienc

Question 14

At its profit-maximizing output, the firm in the above figure incurs a total cost of production of

Accepted Answer

A)  $7,000. 
B)  $9,000. 
C)  $6,300. 
D)  $3,900. 
A)  $7,000. 
B)  $9,000. 
C)  $6,300. 
D)  $3,900.

Question 15

In a monopolistically competitive market, the consumer receives the benefit of

Accepted Answer

A)  production at minimum average cost. 
B)  production where price equals marginal cost. 
C)  product differentiation. 
D)  allocative efficiency. 
A)  production at minimum average cost. 
B)  production where price equals marginal cost. 
C)  product differentiation. 
D)  allocative efficiency.

Question 16

Monopolistic competition and perfect competition are similar in that each market structure is characterized by

Accepted Answer

A)  advertising. 
B)  production at minimum average cost in the long run. 
C)  a horizontal demand curve. 
D)  the absence of long-run economic profits. 
A)  advertising. 
B)  production at minimum average cost in the long run. 
C)  a horizontal demand curve. 
D)  the absence of long-run economic profits.

Question 17

To differentiate its product, a monopolistic competitive firm will engage in all of the following advertising practices EXCEPT

Accepted Answer

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

Question 18

-Refer to the above figure. A long-run equilibrium in monopolistic competition is pictured by

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 market demand for the product of a monopolistic competitor will likely be

Accepted Answer

A)  unitary elastic. 
B)  relatively inelastic. 
C)  relatively elastic. 
D)  perfectly elastic. 
A)  unitary elastic. 
B)  relatively inelastic. 
C)  relatively elastic. 
D)  perfectly elastic.

Question 20

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

Accepted Answer

A)  a large number of sellers in a highly competitive market 
B)  differentiated products 
C)  the existence of advertising 
D)  marginal cost pricing in the long run 
A)  a large number of sellers in a highly competitive market 
B)  differentiated products 
C)  the existence of advertising 
D)  marginal cost pricing in the long run

Exam 25: Monopolistic Competition

A good that has qualities that are easy for a consumer to assess in advance of a purchase is called

Which of the following is FALSE about a comparison between a perfectly competitive firm and a monopolistically competitive firm?

An information product typically has

Which of the following is most likely to be a monopolistically competitive firm?

All of the following are characteristics of a monopolistically competitive industry EXCEPT

For a monopolistically competitive firm

The demand curve for the product of a monopolistically competitive firm

-Use the above figure. The economic profit for this firm is

Advertising intended to induce a consumer to discover a previously unknown taste or preference is

When a pharmaceutical company advertises that its allergy medication is clinically proven to alleviate hay fever symptoms, the pharmaceutical company is engaging in

Why is it that a monopolistically competitive firm cannot earn positive economic profits in the long run?

A computer game is an example of

Why would Sunkist incur substantial costs to advertise and establish a brand name when the quality of its oranges can easily be evaluated by consumers?

At its profit-maximizing output, the firm in the above figure incurs a total cost of production of

In a monopolistically competitive market, the consumer receives the benefit of

Monopolistic competition and perfect competition are similar in that each market structure is characterized by

To differentiate its product, a monopolistic competitive firm will engage in all of the following advertising practices EXCEPT

-Refer to the above figure. A long-run equilibrium in monopolistic competition is pictured by

The market demand for the product of a monopolistic competitor will likely be

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

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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