Question 1

In the short run, the monopolistic competitor is just like the perfect competitor in that

Accepted Answer

A)  equilibrium is determined by setting price equal to marginal cost. 
B)  either type of firm can earn economic profits, experience economic losses, or break even in the short run. 
C)  each equates marginal revenue and marginal cost in order to maximize profits, with the result that price exceeds marginal revenue. 
D)  new firms enter in the short run when firms are making profits. 
A)  equilibrium is determined by setting price equal to marginal cost. 
B)  either type of firm can earn economic profits, experience economic losses, or break even in the short run. 
C)  each equates marginal revenue and marginal cost in order to maximize profits, with the result that price exceeds marginal revenue. 
D)  new firms enter in the short run when firms are making profits.

Question 2

John has just tried on the most comfortable pair of pants that he has ever known. The pants are a(n)

Accepted Answer

A)  experience good. 
B)  credence good. 
C)  logo good. 
D)  information good. 
A)  experience good. 
B)  credence good. 
C)  logo good. 
D)  information good.

Question 3

A distinguishing characteristic of producers of information products is their

Accepted Answer

A)  high social cost. 
B)  short-run economies of operation. 
C)  low average fixed costs. 
D)  low fixed costs. 
A)  high social cost. 
B)  short-run economies of operation. 
C)  low average fixed costs. 
D)  low fixed costs.

Question 4

Average variable 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 5

Which of the following is NOT a feature of a monopolistically competitive market?

Accepted Answer

A)  numerous buyers and sellers 
B)  differentiated products 
C)  advertising 
D)  perfectly elastic demand curve 
A)  numerous buyers and sellers 
B)  differentiated products 
C)  advertising 
D)  perfectly elastic demand curve

Question 6

-In the above figure, total revenue for this profit-maximizing monopolistically competitive firm is

Accepted Answer

A)  $50,000. 
B)  $91,000. 
C)  $96,000. 
D)  $100,000. 
A)  $50,000. 
B)  $91,000. 
C)  $96,000. 
D)  $100,000.

Question 7

An information product is a product for which

Accepted Answer

A)  the first item is produced inexpensively but additional units are more costly to produce. 
B)  the first unit is very costly to make but additional units are less costly to produce. 
C)  the marginal cost first falls and then rises but the average total cost rises throughout its range. 
D)  the average fixed cost first falls and then rises, but the average total cost falls throughout its range. 
A)  the first item is produced inexpensively but additional units are more costly to produce. 
B)  the first unit is very costly to make but additional units are less costly to produce. 
C)  the marginal cost first falls and then rises but the average total cost rises throughout its range. 
D)  the average fixed cost first falls and then rises, but the average total cost falls throughout its range.

Question 8

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

Accepted Answer

A)  $480. 
B)  $400. 
C)  $540. 
D)  $880. 
A)  $480. 
B)  $400. 
C)  $540. 
D)  $880.

Question 9

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

Accepted Answer

A)  80 units and $11. 
B)  50 units and $8. 
C)  60 units and $9. 
D)  60 units and $14. 
A)  80 units and $11. 
B)  50 units and $8. 
C)  60 units and $9. 
D)  60 units and $14.

Question 10

In a monopolistically competitive market, entry into the industry

Accepted Answer

A)  is relatively easy. 
B)  is blocked. 
C)  is difficult due to extensive government regulation. 
D)  is as difficult as entry into a monopoly. 
A)  is relatively easy. 
B)  is blocked. 
C)  is difficult due to extensive government regulation. 
D)  is as difficult as entry into a monopoly.

Question 11

Why do firms in a monopolistically competitive industry advertise?

Accepted Answer

In a monopolistically competitive indust

Question 12

In which industry structure is advertising and sales promotion likely to be most important?

Accepted Answer

A)  perfect competition 
B)  monopoly 
C)  monopolistic competition 
D)  All of the above are equally reliant on effective advertising and promotion. 
A)  perfect competition 
B)  monopoly 
C)  monopolistic competition 
D)  All of the above are equally reliant on effective advertising and promotion.

Question 13

What is the most important characteristic of monopolistic competition? How do firms behave differently from perfect competitors?

Accepted Answer

Product differentiation is the most impo

Question 14

A market situation in which a large number of firms produce similar but not identical products is called

Accepted Answer

A)  pure monopoly. 
B)  monopolistically competitive. 
C)  oligopolistic behavior. 
D)  perfectly competitive. 
A)  pure monopoly. 
B)  monopolistically competitive. 
C)  oligopolistic behavior. 
D)  perfectly competitive.

Question 15

In the long run, what level of economic profits can a monopolistic competitor expect to receive?

Accepted Answer

A)  positive 
B)  zero 
C)  negative 
D)  either negative or positive, depending on the demand for its product and its costs 
A)  positive 
B)  zero 
C)  negative 
D)  either negative or positive, depending on the demand for its product and its costs

Question 16

The long-run equilibrium of a monopolistic competitor differs from the long-run equilibrium of a perfect competitor in that

Accepted Answer

A)  the monopolistic competitor makes economic profits. 
B)  the monopolistic competitor sets price equal to marginal cost. 
C)  the monopolistic competitor produces at the minimum point of its average total cost curve. 
D)  the monopolistic competitor charges a price that exceeds marginal cost. 
A)  the monopolistic competitor makes economic profits. 
B)  the monopolistic competitor sets price equal to marginal cost. 
C)  the monopolistic competitor produces at the minimum point of its average total cost curve. 
D)  the monopolistic competitor charges a price that exceeds marginal cost.

Question 17

One way to view the cost structure of monopolistic competition is to say that the cost of product differentiation is equal to

Accepted Answer

A)  the difference between marginal revenue and marginal cost. 
B)  the difference between the cost of production for a monopolistically competitive firm in an open market and the minimum average total cost. 
C)  the sum of price and marginal cost. 
D)  the sum of marginal cost and minimum average cost. 
A)  the difference between marginal revenue and marginal cost. 
B)  the difference between the cost of production for a monopolistically competitive firm in an open market and the minimum average total cost. 
C)  the sum of price and marginal cost. 
D)  the sum of marginal cost and minimum average cost.

Question 18

In the above figure, this profit-maximizing monopolistic competitive firm will realize an economic profit of

Accepted Answer

A)  -$1,400. 
B)  $2,100. 
C)  $1,400. 
D)  $700. 
A)  -$1,400. 
B)  $2,100. 
C)  $1,400. 
D)  $700.

Question 19

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

Accepted Answer

A)  smartphone manufacturer 
B)  cellphone service provider 
C)  college textbook publisher 
D)  computer software maker 
A)  smartphone manufacturer 
B)  cellphone service provider 
C)  college textbook publisher 
D)  computer software maker

Question 20

The products sold by monopolistically competitive firms

Accepted Answer

A)  are differentiated. 
B)  are homogeneous. 
C)  can be either homogeneous or differentiated. 
D)  have no close substitutes. 
A)  are differentiated. 
B)  are homogeneous. 
C)  can be either homogeneous or differentiated. 
D)  have no close substitutes.

Exam 25: Monopolistic Competition

In the short run, the monopolistic competitor is just like the perfect competitor in that

John has just tried on the most comfortable pair of pants that he has ever known. The pants are a(n)

A distinguishing characteristic of producers of information products is their

Average variable cost for an information product would

Which of the following is NOT a feature of a monopolistically competitive market?

-In the above figure, total revenue for this profit-maximizing monopolistically competitive firm is

An information product is a product for which

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

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

In a monopolistically competitive market, entry into the industry

Why do firms in a monopolistically competitive industry advertise?

In which industry structure is advertising and sales promotion likely to be most important?

What is the most important characteristic of monopolistic competition? How do firms behave differently from perfect competitors?

A market situation in which a large number of firms produce similar but not identical products is called

In the long run, what level of economic profits can a monopolistic competitor expect to receive?

The long-run equilibrium of a monopolistic competitor differs from the long-run equilibrium of a perfect competitor in that

One way to view the cost structure of monopolistic competition is to say that the cost of product differentiation is equal to

In the above figure, this profit-maximizing monopolistic competitive firm will realize an economic profit of

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

The products sold by monopolistically competitive firms

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

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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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