Question 1

Products such as office supplies are examples of

Accepted Answer

A)  experience goods. 
B)  simple goods. 
C)  search goods. 
D)  selective goods. 
A)  experience goods. 
B)  simple goods. 
C)  search goods. 
D)  selective goods.

Question 2

Which of the following is NOT a characteristic of firms in a monopolistically competitive market?

Accepted Answer

A)  advertising 
B)  differentiated products 
C)  ease of entry and exit 
D)  existence of significant economies of scale 
A)  advertising 
B)  differentiated products 
C)  ease of entry and exit 
D)  existence of significant economies of scale

Question 3

-Refer to the above figure. Which panel represents a monopolistic competitor that is earning zero economic profits?

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 4

In the short run, the ATC curve and the AFC curve for information products are

Accepted Answer

A)  downward sloping. 
B)  horizontal. 
C)  upward sloping. 
D)  vertical. 
A)  downward sloping. 
B)  horizontal. 
C)  upward sloping. 
D)  vertical.

Question 5

Compared with a monopolist, the demand curve faced by a monopolistically competitive firm is

Accepted Answer

A)  more elastic. 
B)  more inelastic. 
C)  perfectly elastic. 
D)  perfectly inelastic. 
A)  more elastic. 
B)  more inelastic. 
C)  perfectly elastic. 
D)  perfectly inelastic.

Question 6

Judy has just looked through her favorite catalog that came in the mail and has placed an order. The catalog 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 7

Considering the relevant market structures, which is an INCORRECT statement?

Accepted Answer

A)  In a perfectly competitive situation, there is an extremely large number of firms. 
B)  In pure monopoly, there is only one firm. 
C)  In monopolistic competition, there is a large number of firms. 
D)  In any market situation, the number of firms is not very important. 
A)  In a perfectly competitive situation, there is an extremely large number of firms. 
B)  In pure monopoly, there is only one firm. 
C)  In monopolistic competition, there is a large number of firms. 
D)  In any market situation, the number of firms is not very important.

Question 8

-Use the above figure. For this monopolistic competitor, which of the following is INCORRECT?

Accepted Answer

A)  The profit-maximizing rate of output is qe, and the profit-maximizing price is P. 
B)  The demand curve shows a direct relationship between price and quantity demanded. 
C)  The profit-maximizing rate of output is at E, where MR intersects MC. 
D)  A downward sloping marginal revenue curve that is below the demand curve. 
A)  The profit-maximizing rate of output is qe, and the profit-maximizing price is P. 
B)  The demand curve shows a direct relationship between price and quantity demanded. 
C)  The profit-maximizing rate of output is at E, where MR intersects MC. 
D)  A downward sloping marginal revenue curve that is below the demand curve.

Question 9

If a monopolistically competitive firm selling an information product engages in marginal cost pricing, it will

Accepted Answer

A)  earn additional profits. 
B)  fail to earn sufficient revenues to cover its fixed costs. 
C)  lower costs. 
D)  break even. 
A)  earn additional profits. 
B)  fail to earn sufficient revenues to cover its fixed costs. 
C)  lower costs. 
D)  break even.

Question 10

For the monopolistic competitor, which of the following is INCORRECT?

Accepted Answer

A)  Because the firm is not a perfect competitor, its demand curve slopes downward. 
B)  The marginal revenue curve is downward sloping and lies below the demand curve. 
C)  The profit-maximizing rate of output arises at the point at which the marginal cost curve intersects the marginal revenue curve. 
D)  If the firm in a monopolistically competitive industry were making economic losses, new firms will enter the industry. 
A)  Because the firm is not a perfect competitor, its demand curve slopes downward. 
B)  The marginal revenue curve is downward sloping and lies below the demand curve. 
C)  The profit-maximizing rate of output arises at the point at which the marginal cost curve intersects the marginal revenue curve. 
D)  If the firm in a monopolistically competitive industry were making economic losses, new firms will enter the industry.

Question 11

-Use the above figure. When it maximizes its economic profits, the monopolistically competitive firm depicted in the figure

Accepted Answer

A)  is earning an economic profit. 
B)  is earning an accounting profit. 
C)  is earning an economic loss. 
D)  must increase output to reduce the ATC. 
A)  is earning an economic profit. 
B)  is earning an accounting profit. 
C)  is earning an economic loss. 
D)  must increase output to reduce the ATC.

Question 12

Monopolistic competition is characterized by

Accepted Answer

A)  relative ease of entry into the market. 
B)  a standard, undifferentiated product. 
C)  persistent long-run economic profits. 
D)  a horizontal demand curve faced by all firms. 
A)  relative ease of entry into the market. 
B)  a standard, undifferentiated product. 
C)  persistent long-run economic profits. 
D)  a horizontal demand curve faced by all firms.

Question 13

When a firm relies on social media ads to reach potential customers, the firm is engaging in

Accepted Answer

A)  direct marketing. 
B)  mass marketing. 
C)  false marketing. 
D)  none of the above. 
A)  direct marketing. 
B)  mass marketing. 
C)  false marketing. 
D)  none of the above.

Question 14

-Refer to the above figure. The above figure shows the cost structure of a firm producing an information product. Which curve represents average total cost?

Accepted Answer

A)  Any of the 3 could be ATC. 
B)  Curve 1 
C)  Curve 2 
D)  Curve 3 
A)  Any of the 3 could be ATC. 
B)  Curve 1 
C)  Curve 2 
D)  Curve 3

Question 15

Marginal 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 16

Long-run equilibrium for a monopolistic competitor is characterized by

Accepted Answer

A)  a price exceeding marginal cost. 
B)  marginal cost pricing. 
C)  economic profits. 
D)  too few firms in the industry. 
A)  a price exceeding marginal cost. 
B)  marginal cost pricing. 
C)  economic profits. 
D)  too few firms in the industry.

Question 17

Since the firm in the above figure is operating in a monopolistically competitive industry, in the long run we can expect to see

Accepted Answer

A)  the typical firm's economic profits expand as production becomes more efficient. 
B)  more firms entering the industry until economic profits are zero. 
C)  the typical firm producing at the minimum point on its ATC curve. 
D)  each firm expand its share of the total market. 
A)  the typical firm's economic profits expand as production becomes more efficient. 
B)  more firms entering the industry until economic profits are zero. 
C)  the typical firm producing at the minimum point on its ATC curve. 
D)  each firm expand its share of the total market.

Question 18

The demand curve for a monopolistically competitive firm is

Accepted Answer

A)  elastic because the products produced are homogeneous. 
B)  inelastic because of barriers to entry. 
C)  inelastic because of the profit maximizing behavior of the firm. 
D)  elastic because of product differentiation. 
A)  elastic because the products produced are homogeneous. 
B)  inelastic because of barriers to entry. 
C)  inelastic because of the profit maximizing behavior of the firm. 
D)  elastic because of product differentiation.

Question 19

Which statement is INCORRECT with respect to sales promotion and advertising?

Accepted Answer

A)  Perfect competition differs from monopolistic competition in that no individual firm in a perfectly competitive market will advertise. 
B)  A perfectly competitive firm, by definition, can sell all that it wants to sell at the going market price. 
C)  A perfect competitor advertises a product that is different from the products that all other firms in the industry are selling. 
D)  Advertising should be carried to the point at which the additional revenue from one more dollar of advertising just equals that one dollar of marginal cost. 
A)  Perfect competition differs from monopolistic competition in that no individual firm in a perfectly competitive market will advertise. 
B)  A perfectly competitive firm, by definition, can sell all that it wants to sell at the going market price. 
C)  A perfect competitor advertises a product that is different from the products that all other firms in the industry are selling. 
D)  Advertising should be carried to the point at which the additional revenue from one more dollar of advertising just equals that one dollar of marginal cost.

Question 20

A product with qualities that consumers lack the expertise to assess without assistance is called a(n)

Accepted Answer

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

Exam 25: Monopolistic Competition

Products such as office supplies are examples of

Which of the following is NOT a characteristic of firms in a monopolistically competitive market?

-Refer to the above figure. Which panel represents a monopolistic competitor that is earning zero economic profits?

In the short run, the ATC curve and the AFC curve for information products are

Compared with a monopolist, the demand curve faced by a monopolistically competitive firm is

Judy has just looked through her favorite catalog that came in the mail and has placed an order. The catalog is an example of

Considering the relevant market structures, which is an INCORRECT statement?

-Use the above figure. For this monopolistic competitor, which of the following is INCORRECT?

If a monopolistically competitive firm selling an information product engages in marginal cost pricing, it will

For the monopolistic competitor, which of the following is INCORRECT?

-Use the above figure. When it maximizes its economic profits, the monopolistically competitive firm depicted in the figure

Monopolistic competition is characterized by

When a firm relies on social media ads to reach potential customers, the firm is engaging in

-Refer to the above figure. The above figure shows the cost structure of a firm producing an information product. Which curve represents average total cost?

Marginal cost for an information product would

Long-run equilibrium for a monopolistic competitor is characterized by

Since the firm in the above figure is operating in a monopolistically competitive industry, in the long run we can expect to see

The demand curve for a monopolistically competitive firm is

Which statement is INCORRECT with respect to sales promotion and advertising?

A product with qualities that consumers lack the expertise to assess without assistance is called a(n)

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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