Question 1

A firm in monopolistic competition

Accepted Answer

A)  has no control over the price of the product it is selling. 
B)  might be selling a brand name product. 
C)  does not advertise nor market its product. 
D)  Both answers A and B are correct. 
E)  Answers A, B, and C are correct. 
A)  has no control over the price of the product it is selling. 
B)  might be selling a brand name product. 
C)  does not advertise nor market its product. 
D)  Both answers A and B are correct. 
E)  Answers A, B, and C are correct.

Question 2

If the four-firm concentration ratio of an industry is

Accepted Answer

A)  near 100, the industry is considered very competitive. 
B)  less than 40, the industry is considered an oligopoly. 
C)  over 40, the industry is considered monopolistic competition. 
D)  less than 40, the industry is considered monopolistic competition. 
E)  close to 0, the industry is considered a monopoly. 
A)  near 100, the industry is considered very competitive. 
B)  less than 40, the industry is considered an oligopoly. 
C)  over 40, the industry is considered monopolistic competition. 
D)  less than 40, the industry is considered monopolistic competition. 
E)  close to 0, the industry is considered a monopoly.

Question 3

The primary reason why monopolistically competitive firms cannot make an economic profit in the long run is because

Accepted Answer

A)  there are barriers to entry. 
B)  there is freedom of entry. 
C)  the antitrust laws prevent profit from increasing. 
D)  recessions occur. 
E)  they collude to make a normal profit. 
A)  there are barriers to entry. 
B)  there is freedom of entry. 
C)  the antitrust laws prevent profit from increasing. 
D)  recessions occur. 
E)  they collude to make a normal profit.

Question 4

-An industry's total revenue is $100 million.The above table shows the total revenue of the four largest firms in an industry.
a.Calculate this industry's four-firm concentration ratio.
b.Is this industry competitive?
c.What market type does it most likely represent?

Accepted Answer

a.The four-firm concentration

Question 5

Which market structure is characterized by the following characteristics?
i.a large number of firms compete
ii.each firm produces a differentiated product
iii.firms are free to enter and exit

Accepted Answer

A)  perfect competition 
B)  duopoly 
C)  oligopoly 
D)  monopolistic competition 
E)  monopoly 
A)  perfect competition 
B)  duopoly 
C)  oligopoly 
D)  monopolistic competition 
E)  monopoly

Question 6

The absence of barriers to entry in monopolistic competition means that in the long run firms

Accepted Answer

A)  make an economic profit. 
B)  make zero economic profit. 
C)  incur an economic loss. 
D)  make either an economic profit or zero economic profit. 
E)  make either zero economic profit or incur an economic loss. 
A)  make an economic profit. 
B)  make zero economic profit. 
C)  incur an economic loss. 
D)  make either an economic profit or zero economic profit. 
E)  make either zero economic profit or incur an economic loss.

Question 7

Which of the following is true about monopolistic competition but false about perfect competition?

Accepted Answer

A)  There are a large number of independently acting sellers. 
B)  There are no barriers to entry. 
C)  Firms can make an economic profit in the short run. 
D)  Firms compete on their product's price as well as its quality and marketing. 
E)  Firms cannot make an economic profit in the long run. 
A)  There are a large number of independently acting sellers. 
B)  There are no barriers to entry. 
C)  Firms can make an economic profit in the short run. 
D)  Firms compete on their product's price as well as its quality and marketing. 
E)  Firms cannot make an economic profit in the long run.

Question 8

The Herfindahl-Hirschman Index is used as a guideline to determine if a market is competitive or concentrated.Calculate the index value for each market described below.
a.100 firms,each of which produces 1 per cent of market output
b.50 firms,each of which produces 2 per cent of market output
c.25 firms,each of which produces 4 per cent of market output
d.20 firms,each of which produces 5 per cent of market output
e.10 firms,each of which produces 10 per cent of market output
f.5 firms,each of which produces 20 per cent of market output
g.2 firms,each of which produces 50 per cent of market output

Accepted Answer

a.100 × 1 = 100
b.50 × 4 = 200

Question 9

For a monopolistically competitive firm,the demand curve

Accepted Answer

A)  is a horizontal line. 
B)  has a positive slope. 
C)  is vertical. 
D)  has a negative slope. 
E)  is the same as the marginal revenue curve. 
A)  is a horizontal line. 
B)  has a positive slope. 
C)  is vertical. 
D)  has a negative slope. 
E)  is the same as the marginal revenue curve.

Question 10

The four largest firms in an industry account for the following value of industry revenues: 12 percent,8 percent,5 percent and 4 percent.Calculate the four-firm concentration ratio.Would this industry be regarded as competitive or concentrated?

Accepted Answer

The four-firm concentration ra

Question 11

-The above figure shows a restaurant engaged in monopolistic competition with other restaurants.The equilibrium price at this restaurant is ________ per meal.

Accepted Answer

A)  $20 
B)  $30 
C)  $50 
D)  less than $20 
E)  more than $50 
A)  $20 
B)  $30 
C)  $50 
D)  less than $20 
E)  more than $50

Question 12

Even though monopolistic competition results in inefficiency,it does have which of the following benefits for society?

Accepted Answer

A)  Firms make zero economic profit in the long run. 
B)  Firms can make an economic profit in the short run. 
C)  Product variety benefits consumers. 
D)  Marginal cost equals price in the long run. 
E)  The premise of the question is incorrect because nothing in monopolistic competition justifies any economic inefficiency. 
A)  Firms make zero economic profit in the long run. 
B)  Firms can make an economic profit in the short run. 
C)  Product variety benefits consumers. 
D)  Marginal cost equals price in the long run. 
E)  The premise of the question is incorrect because nothing in monopolistic competition justifies any economic inefficiency.

Question 13

For a firm in monopolistic competition to undertake product development,the marginal cost of the development must be ________ the marginal benefit of the development to consumers.

Accepted Answer

A)  greater than 
B)  less than 
C)  not comparable to 
D)  equal to or less than 
E)  None of the above because a monopolistically competitive firm undertakes product development if the marginal cost of the development is less than or equal to the marginal revenue to the firm from the development. 
A)  greater than 
B)  less than 
C)  not comparable to 
D)  equal to or less than 
E)  None of the above because a monopolistically competitive firm undertakes product development if the marginal cost of the development is less than or equal to the marginal revenue to the firm from the development.

Question 14

-The above figure definitely shows

Accepted Answer

A)  a long-run equilibrium for a monopolistically competitive firm. 
B)  an industry with few firms. 
C)  a long-run equilibrium for a perfectly competitive firm. 
D)  a long-run equilibrium for a perfectly competitive market. 
E)  a short-run equilibrium for a monopoly. 
A)  a long-run equilibrium for a monopolistically competitive firm. 
B)  an industry with few firms. 
C)  a long-run equilibrium for a perfectly competitive firm. 
D)  a long-run equilibrium for a perfectly competitive market. 
E)  a short-run equilibrium for a monopoly.

Question 15

A firm in monopolistic competition has ________ demand curve.

Accepted Answer

A)  a downward sloping 
B)  an upward sloping 
C)  a vertical 
D)  a horizontal 
E)  a U-shaped 
A)  a downward sloping 
B)  an upward sloping 
C)  a vertical 
D)  a horizontal 
E)  a U-shaped

Question 16

The darkened area in the figure above is the

Accepted Answer

A)  deadweight loss. 
B)  firm's economic profit. 
C)  consumer surplus. 
D)  firm's total cost. 
E)  firm's total revenue. 
A)  deadweight loss. 
B)  firm's economic profit. 
C)  consumer surplus. 
D)  firm's total cost. 
E)  firm's total revenue.

Question 17

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

Accepted Answer

A)  few firms compete 
B)  easy entry and exit 
C)  small market share 
D)  differentiated product 
E)  no barriers to entry or exit 
A)  few firms compete 
B)  easy entry and exit 
C)  small market share 
D)  differentiated product 
E)  no barriers to entry or exit

Question 18

What is the Herfindahl-Hirschman Index if the four firms in an industry account have market shares of 62 percent,15 percent,15 percent,and 8 percent?

Accepted Answer

A)  100 
B)  4,358 
C)  111,600 
D)  2,822 
E)  6,200 
A)  100 
B)  4,358 
C)  111,600 
D)  2,822 
E)  6,200

Question 19

Firms in monopolistic competition have demand curves that are

Accepted Answer

A)  horizontal. 
B)  vertical. 
C)  downward sloping. 
D)  upward sloping. 
E)  U-shaped. 
A)  horizontal. 
B)  vertical. 
C)  downward sloping. 
D)  upward sloping. 
E)  U-shaped.

Question 20

Why are firms in monopolistic competition unable to make an economic profit in the long run?

Accepted Answer

While firms in monopolistic competition

A firm in monopolistic competition

If the four-firm concentration ratio of an industry is

The primary reason why monopolistically competitive firms cannot make an economic profit in the long run is because

-An industry's total revenue is $100 million.The above table shows the total revenue of the four largest firms in an industry. a.Calculate this industry's four-firm concentration ratio. b.Is this industry competitive? c.What market type does it most likely represent?

Which market structure is characterized by the following characteristics? i.a large number of firms compete ii.each firm produces a differentiated product iii.firms are free to enter and exit

The absence of barriers to entry in monopolistic competition means that in the long run firms

Which of the following is true about monopolistic competition but false about perfect competition?

For a monopolistically competitive firm,the demand curve

The four largest firms in an industry account for the following value of industry revenues: 12 percent,8 percent,5 percent and 4 percent.Calculate the four-firm concentration ratio.Would this industry be regarded as competitive or concentrated?

-The above figure shows a restaurant engaged in monopolistic competition with other restaurants.The equilibrium price at this restaurant is ________ per meal.

Even though monopolistic competition results in inefficiency,it does have which of the following benefits for society?

For a firm in monopolistic competition to undertake product development,the marginal cost of the development must be ________ the marginal benefit of the development to consumers.

-The above figure definitely shows

A firm in monopolistic competition has ________ demand curve.

The darkened area in the figure above is the

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

What is the Herfindahl-Hirschman Index if the four firms in an industry account have market shares of 62 percent,15 percent,15 percent,and 8 percent?

Firms in monopolistic competition have demand curves that are

Why are firms in monopolistic competition unable to make an economic profit in the long run?

Getting Started

The U.S.and Global Economies

The Economic Problem

Demand and Supply

Elasticities of Demand and Supply

Efficiency and Fairness of Markets

Government Actions in Markets

Taxes

Global Markets in Action

Externalities

Public Goods and Common Resources

Markets with Private Information

Consumer Choice and Demand

Production and Cost

Perfect Competition

Monopoly

Oligopoly

Markets for Factors of Production

Economic Inequality

Filters

Exam 17: Monopolistic Competition

A firm in monopolistic competition

If the four-firm concentration ratio of an industry is

The primary reason why monopolistically competitive firms cannot make an economic profit in the long run is because

-An industry's total revenue is $100 million.The above table shows the total revenue of the four largest firms in an industry. a.Calculate this industry's four-firm concentration ratio. b.Is this industry competitive? c.What market type does it most likely represent?

Which market structure is characterized by the following characteristics? i.a large number of firms compete ii.each firm produces a differentiated product iii.firms are free to enter and exit

The absence of barriers to entry in monopolistic competition means that in the long run firms

Which of the following is true about monopolistic competition but false about perfect competition?

For a monopolistically competitive firm,the demand curve

The four largest firms in an industry account for the following value of industry revenues: 12 percent,8 percent,5 percent and 4 percent.Calculate the four-firm concentration ratio.Would this industry be regarded as competitive or concentrated?

-The above figure shows a restaurant engaged in monopolistic competition with other restaurants.The equilibrium price at this restaurant is ________ per meal.

Even though monopolistic competition results in inefficiency,it does have which of the following benefits for society?

For a firm in monopolistic competition to undertake product development,the marginal cost of the development must be ________ the marginal benefit of the development to consumers.

-The above figure definitely shows

A firm in monopolistic competition has ________ demand curve.

The darkened area in the figure above is the

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

What is the Herfindahl-Hirschman Index if the four firms in an industry account have market shares of 62 percent,15 percent,15 percent,and 8 percent?

Firms in monopolistic competition have demand curves that are

Why are firms in monopolistic competition unable to make an economic profit in the long run?

Getting Started

The U.S.and Global Economies

The Economic Problem

Demand and Supply

Elasticities of Demand and Supply

Efficiency and Fairness of Markets

Government Actions in Markets

Taxes

Global Markets in Action

Externalities

Public Goods and Common Resources

Markets with Private Information

Consumer Choice and Demand

Production and Cost

Perfect Competition

Monopoly

Oligopoly

Markets for Factors of Production

Economic Inequality

Filters