Question 1

A monopolistic competitor would face a demand curve with a

Accepted Answer

A)  positive slope. 
B)  negative slope. 
C)  constant slope. 
D)  slope equal to 0. 
A)  positive slope. 
B)  negative slope. 
C)  constant slope. 
D)  slope equal to 0.

Question 2

In the long run, monopolistically competitive firms will not earn economic profits because

Accepted Answer

A)  average total cost will shift up to meet the demand curve. 
B)  input prices will be bid up. 
C)  production will not be at minimum average cost. 
D)  new firms will enter the industry. 
A)  average total cost will shift up to meet the demand curve. 
B)  input prices will be bid up. 
C)  production will not be at minimum average cost. 
D)  new firms will enter the industry.

Question 3

A monopolistic competitor finds its profit-maximizing rate of output by

Accepted Answer

A)  equating the marginal revenue from advertising with the marginal revenue from selling the good. 
B)  setting average revenue equal to average total cost. 
C)  equating marginal revenue and marginal cost. 
D)  equating price and marginal revenue. 
A)  equating the marginal revenue from advertising with the marginal revenue from selling the good. 
B)  setting average revenue equal to average total cost. 
C)  equating marginal revenue and marginal cost. 
D)  equating price and marginal revenue.

Question 4

In the long run, equilibrium positions that arise in both monopolistically competitive and perfectly competitive markets are

Accepted Answer

A)  MR = MC and P = MC. 
B)  P = ATC and P = MC. 
C)  MR = MC and P = ATC. 
D)  MR = MC = P. 
A)  MR = MC and P = MC. 
B)  P = ATC and P = MC. 
C)  MR = MC and P = ATC. 
D)  MR = MC = P.

Question 5

A good that people must actually consume before they can determine qualities 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 6

Marginal cost pricing for an information product

Accepted Answer

A)  would cause the firm to experience economic losses. 
B)  would allow the firm to break even. 
C)  would cause the firm to earn economic profits. 
D)  would cause the firm to expand output to increase economic profits. 
A)  would cause the firm to experience economic losses. 
B)  would allow the firm to break even. 
C)  would cause the firm to earn economic profits. 
D)  would cause the firm to expand output to increase economic profits.

Question 7

Which of the following products would most likely be produced in a monopolistically competitive market?

Accepted Answer

A)  corn 
B)  crude oil 
C)  local water supply 
D)  pizza 
A)  corn 
B)  crude oil 
C)  local water supply 
D)  pizza

Question 8

The demand curve faced by a monopolistically competitive firm is

Accepted Answer

A)  horizontal. 
B)  vertical. 
C)  downward sloping. 
D)  upward or downward sloping depending on market competition. 
A)  horizontal. 
B)  vertical. 
C)  downward sloping. 
D)  upward or downward sloping depending on market competition.

Question 9

The advertisement approach that allows a consumer to follow up directly to an advertising message is known as

Accepted Answer

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

Question 10

Which of the following is TRUE of the price charged by a monopolistically competitive firm at the profit-maximizing level of output?

Accepted Answer

A) P > MC B) P = MC C) P = MR D) P < AVC A) P > MC B) P = MC C) P = MR D) P < AVC

Question 11

Bonnie has just purchased a crystal vase she saw advertised when she went on line to find her local weather forecast. The Internet ad 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 12

The monopolistically competitive firm maximizes profit by producing to the point at which

Accepted Answer

A)  ATC = AVC. 
B)  MC = MR. 
C)  MR = AR. 
D)  MC = P. 
A)  ATC = AVC. 
B)  MC = MR. 
C)  MR = AR. 
D)  MC = P.

Question 13

Entry into a monopolistic competitive industry

Accepted Answer

A)  is easy. 
B)  is hard. 
C)  requires governmental approval. 
D)  requires collusion. 
A)  is easy. 
B)  is hard. 
C)  requires governmental approval. 
D)  requires collusion.

Question 14

Personalized advertising that uses postal mailings, phone calls, and e-mail messages is known as

Accepted Answer

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

Question 15

For an information product, why is a profit-maximizing firm unable to practice marginal cost pricing? How is its price determined in the long run?

Accepted Answer

An information product has the character

Question 16

-In the above figure, the monopolistically competitive firm's profit-maximizing output is

Accepted Answer

A)  1,000 units. 
B)  300 units. 
C)  900 units. 
D)  700 units. 
A)  1,000 units. 
B)  300 units. 
C)  900 units. 
D)  700 units.

Question 17

Stephanie has just placed an order for the latest video after she received a personalized e-mail. The e-mail 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 18

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

Accepted Answer

A)  large number of sellers 
B)  sales promotion and advertising 
C)  homogeneous product 
D)  easy entry of new firms in the long run 
A)  large number of sellers 
B)  sales promotion and advertising 
C)  homogeneous product 
D)  easy entry of new firms in the long run

Question 19

By promoting its brand name heavily, the monopolistically competitive firm

Accepted Answer

A)  earns more profit in the long run. 
B)  signals its long-term intention to stay in the industry. 
C)  signals its intention to leave the industry. 
D)  guarantees a short run profit. 
A)  earns more profit in the long run. 
B)  signals its long-term intention to stay in the industry. 
C)  signals its intention to leave the industry. 
D)  guarantees a short run profit.

Question 20

Information products (e.g., software)

Accepted Answer

A)  have relatively high fixed costs but low marginal and average variable costs. 
B)  have relatively low fixed costs but high marginal and average variable costs. 
C)  have relatively high fixed costs and relatively high marginal and average variable costs. 
D)  have relatively low fixed costs and relatively low marginal and average variable costs. 
A)  have relatively high fixed costs but low marginal and average variable costs. 
B)  have relatively low fixed costs but high marginal and average variable costs. 
C)  have relatively high fixed costs and relatively high marginal and average variable costs. 
D)  have relatively low fixed costs and relatively low marginal and average variable costs.

Exam 25: Monopolistic Competition

A monopolistic competitor would face a demand curve with a

In the long run, monopolistically competitive firms will not earn economic profits because

A monopolistic competitor finds its profit-maximizing rate of output by

In the long run, equilibrium positions that arise in both monopolistically competitive and perfectly competitive markets are

A good that people must actually consume before they can determine qualities is called

Marginal cost pricing for an information product

Which of the following products would most likely be produced in a monopolistically competitive market?

The demand curve faced by a monopolistically competitive firm is

The advertisement approach that allows a consumer to follow up directly to an advertising message is known as

Which of the following is TRUE of the price charged by a monopolistically competitive firm at the profit-maximizing level of output?

Bonnie has just purchased a crystal vase she saw advertised when she went on line to find her local weather forecast. The Internet ad is an example of

The monopolistically competitive firm maximizes profit by producing to the point at which

Entry into a monopolistic competitive industry

Personalized advertising that uses postal mailings, phone calls, and e-mail messages is known as

For an information product, why is a profit-maximizing firm unable to practice marginal cost pricing? How is its price determined in the long run?

-In the above figure, the monopolistically competitive firm's profit-maximizing output is

Stephanie has just placed an order for the latest video after she received a personalized e-mail. The e-mail is an example of

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

By promoting its brand name heavily, the monopolistically competitive firm

Information products (e.g., software)

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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