Question 1

-In the above figure, when this monopolistically competitive firm produces its profit-maximizing output, it sets a per-unit price of

Accepted Answer

A)  $13. 
B)  $11. 
C)  $10. 
D)  $8. 
A)  $13. 
B)  $11. 
C)  $10. 
D)  $8.

Question 2

In the long run, in a monopolistically competitive market, price will be

Accepted Answer

A)  equal to MR. 
B)  equal to MC. 
C)  greater ATC. 
D)  equal to ATC. 
A)  equal to MR. 
B)  equal to MC. 
C)  greater ATC. 
D)  equal to ATC.

Question 3

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

Accepted Answer

A)  $91,000. 
B)  $50,000. 
C)  $70,000. 
D)  $72,000. 
A)  $91,000. 
B)  $50,000. 
C)  $70,000. 
D)  $72,000.

Question 4

In long-run equilibrium in a monopolistically competitive industry, a firm will

Accepted Answer

A)  always earn an economic profit. 
B)  produce an output rate at which P = MC. 
C)  produce at a point to the left of the minimum point on its average total cost curve. 
D)  have a perfectly elastic demand curve. 
A)  always earn an economic profit. 
B)  produce an output rate at which P = MC. 
C)  produce at a point to the left of the minimum point on its average total cost curve. 
D)  have a perfectly elastic demand curve.

Question 5

Monopolistic competition means

Accepted Answer

A)  monopolies from several countries compete in the global market. 
B)  a large number of firms producing homogeneous products. 
C)  a large number of firms producing differentiated products. 
D)  few firms producing differentiated products. 
A)  monopolies from several countries compete in the global market. 
B)  a large number of firms producing homogeneous products. 
C)  a large number of firms producing differentiated products. 
D)  few firms producing differentiated products.

Question 6

-Refer to the above figure. Which panel shows a possible short-run equilibrium for monopolistic competition, but is NOT also a long-run equilibrium?

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 7

Which of the following is most likely to be the subject of informational advertising?

Accepted Answer

A)  a search good 
B)  a credible good 
C)  an experience good 
D)  an inexperience good 
A)  a search good 
B)  a credible good 
C)  an experience good 
D)  an inexperience good

Question 8

If a firm produces an experience good, its mode of advertising will be

Accepted Answer

A)  persuasive advertising. 
B)  direct advertising. 
C)  not to advertise. 
D)  none of the above. 
A)  persuasive advertising. 
B)  direct advertising. 
C)  not to advertise. 
D)  none of the above.

Question 9

-Use the above figure. The total cost of producing at the optimal level for the monopolistically competitive firm is

Accepted Answer

A)  $285. 
B)  $255. 
C)  $180. 
D)  $300. 
A)  $285. 
B)  $255. 
C)  $180. 
D)  $300.

Question 10

Which of the following statements is generally TRUE about information products?

Accepted Answer

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

Question 11

The demand curve for a monopolistically competitive firm is

Accepted Answer

A)  the same as the industry demand curve. 
B)  more elastic than the demand curve of the perfectly competitive firm. 
C)  less elastic than the demand curve of the perfectly competitive firm. 
D)  horizontal. 
A)  the same as the industry demand curve. 
B)  more elastic than the demand curve of the perfectly competitive firm. 
C)  less elastic than the demand curve of the perfectly competitive firm. 
D)  horizontal.

Question 12

Entry into a monopolistically competitive industry

Accepted Answer

A)  is relatively easy. 
B)  is very difficult. 
C)  can be easy or difficult, depending on the type of product. 
D)  is about the same as entering a monopoly industry. 
A)  is relatively easy. 
B)  is very difficult. 
C)  can be easy or difficult, depending on the type of product. 
D)  is about the same as entering a monopoly industry.

Question 13

The number of firms in a monopolistically competitive industry means that

Accepted Answer

A)  firms will collude. 
B)  existing firms in the industry will make sure new firms do not enter. 
C)  firms will not cooperate to set a pure monopoly price. 
D)  firms will try to set a common price. 
A)  firms will collude. 
B)  existing firms in the industry will make sure new firms do not enter. 
C)  firms will not cooperate to set a pure monopoly price. 
D)  firms will try to set a common price.

Question 14

In the long run, a monopolistically competitive firm

Accepted Answer

A)  earns positive economic profits. 
B)  earns zero economic profits. 
C)  earns negative economic profits. 
D)  can have positive, zero, or negative profits. 
A)  earns positive economic profits. 
B)  earns zero economic profits. 
C)  earns negative economic profits. 
D)  can have positive, zero, or negative profits.

Question 15

The type of advertising that emphasizes the features of its product is

Accepted Answer

A)  informational advertising. 
B)  persuasive advertising. 
C)  search advertising. 
D)  experience advertising. 
A)  informational advertising. 
B)  persuasive advertising. 
C)  search advertising. 
D)  experience advertising.

Question 16

Firms that produce an information product experience short-run economies of operation because

Accepted Answer

A)  the firm will always produce in the decreasing portion of the marginal cost curve. 
B)  of the U-shaped nature of the average total cost curve. 
C)  of the U-shaped nature of the average variable cost curve. 
D)  the average total cost of producing and selling the product declines as output increases. 
A)  the firm will always produce in the decreasing portion of the marginal cost curve. 
B)  of the U-shaped nature of the average total cost curve. 
C)  of the U-shaped nature of the average variable cost curve. 
D)  the average total cost of producing and selling the product declines as output increases.

Question 17

All of the following are assumptions of monopolistic competition EXCEPT

Accepted Answer

A)  many buyers and sellers. 
B)  homogeneous product. 
C)  easy entry of new firms in the long run. 
D)  profit-maximizing behavior. 
A)  many buyers and sellers. 
B)  homogeneous product. 
C)  easy entry of new firms in the long run. 
D)  profit-maximizing behavior.

Question 18

Which of the following is a characteristic of monopolistic competition?

Accepted Answer

A)  few firms 
B)  homogeneous products 
C)  easy entry and exit 
D)  strategic dependence 
A)  few firms 
B)  homogeneous products 
C)  easy entry and exit 
D)  strategic dependence

Question 19

According to Chamberlin, the fact that in the long run average total cost exceeds its minimum value under monopolistic competition is

Accepted Answer

A)  the social cost of monopolistic competition. 
B)  the most important reason for why monopolistic competition is not efficient. 
C)  part of the cost of producing different products for consumers. 
D)  actually beneficial because it makes adjustments easier when demand increases. 
A)  the social cost of monopolistic competition. 
B)  the most important reason for why monopolistic competition is not efficient. 
C)  part of the cost of producing different products for consumers. 
D)  actually beneficial because it makes adjustments easier when demand increases.

Question 20

Monopolistically competitive firms advertise to attempt to

Accepted Answer

A)  lower their average variable costs. 
B)  build brand loyalty. 
C)  lower barriers to entry. 
D)  increase barriers to entry. 
A)  lower their average variable costs. 
B)  build brand loyalty. 
C)  lower barriers to entry. 
D)  increase barriers to entry.

Exam 25: Monopolistic Competition

-In the above figure, when this monopolistically competitive firm produces its profit-maximizing output, it sets a per-unit price of

In the long run, in a monopolistically competitive market, price will be

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

In long-run equilibrium in a monopolistically competitive industry, a firm will

Monopolistic competition means

-Refer to the above figure. Which panel shows a possible short-run equilibrium for monopolistic competition, but is NOT also a long-run equilibrium?

Which of the following is most likely to be the subject of informational advertising?

If a firm produces an experience good, its mode of advertising will be

-Use the above figure. The total cost of producing at the optimal level for the monopolistically competitive firm is

Which of the following statements is generally TRUE about information products?

The demand curve for a monopolistically competitive firm is

Entry into a monopolistically competitive industry

The number of firms in a monopolistically competitive industry means that

In the long run, a monopolistically competitive firm

The type of advertising that emphasizes the features of its product is

Firms that produce an information product experience short-run economies of operation because

All of the following are assumptions of monopolistic competition EXCEPT

Which of the following is a characteristic of monopolistic competition?

According to Chamberlin, the fact that in the long run average total cost exceeds its minimum value under monopolistic competition is

Monopolistically competitive firms advertise to attempt to

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