Question 1

An industry with a large number of firms,differentiated products,and free entry and exit is called

Accepted Answer

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

Question 2

For a firm in monopolistic competition,innovation and product development are

Accepted Answer

A)  senseless because economic profit is always zero in the long run. 
B)  necessary in order to have a chance of making at least a short-run economic profit. 
C)  inconsequential because each firm produces a different product. 
D)  necessary to allow new firms to enter. 
E)  uncommon because other firms already produce similar products. 
A)  senseless because economic profit is always zero in the long run. 
B)  necessary in order to have a chance of making at least a short-run economic profit. 
C)  inconsequential because each firm produces a different product. 
D)  necessary to allow new firms to enter. 
E)  uncommon because other firms already produce similar products.

Question 3

-The above figure represents a restaurant operating in monopolistic competition.
a.What is the profit-maximizing level of output?
b.What price will the firm charge?
c.What is the firm's profit (or loss)?
d.Is this a long-run equilibrium? Why or why not?
e.Is this firm producing its efficient scale of output?

Accepted Answer

a.The quantity is 20 meals a day.
b.The

Question 4

Firms attempt to create a consumer perception of product differentiation through
i.packaging.
ii.marketing.
iii.advertising.

Accepted Answer

A)  i only 
B)  ii only 
C)  ii and iii 
D)  i and iii 
E)  i, ii, and iii 
A)  i only 
B)  ii only 
C)  ii and iii 
D)  i and iii 
E)  i, ii, and iii

Question 5

-The table above shows the revenue figures for a(n)________ market because its four-firm concentration ratio is ________ percent.

Accepted Answer

A)  competitive; 35.5 
B)  uncompetitive; 55 
C)  perfectly competitive; 15.5 
D)  concentrated; 55 
E)  perfectly competitive; 35.5 
A)  competitive; 35.5 
B)  uncompetitive; 55 
C)  perfectly competitive; 15.5 
D)  concentrated; 55 
E)  perfectly competitive; 35.5

Question 6

In monopolistic competition in the long run,firms ________.

Accepted Answer

A)  make zero economic profit and require more capacity 
B)  incur an economic loss and require more capacity 
C)  make an economic profit and have excess capacity 
D)  make zero economic profit and have excess capacity 
E)  make an economic profit and require more capacity 
A)  make zero economic profit and require more capacity 
B)  incur an economic loss and require more capacity 
C)  make an economic profit and have excess capacity 
D)  make zero economic profit and have excess capacity 
E)  make an economic profit and require more capacity

Question 7

Which of the following four-firm concentration ratios would be the best indicator of an oligopoly?

Accepted Answer

A)  0.25 percent 
B)  31 percent 
C)  78 percent 
D)  100 percent 
E)  11 percent 
A)  0.25 percent 
B)  31 percent 
C)  78 percent 
D)  100 percent 
E)  11 percent

Question 8

Excess capacity exists when a firm produces

Accepted Answer

A)  more than the profit-maximizing level of output. 
B)  less than the quantity that minimizes average total cost. 
C)  less than the quantity that minimizes marginal cost. 
D)  more than the quantity that minimizes marginal cost. 
E)  None of the above answers is correct. 
A)  more than the profit-maximizing level of output. 
B)  less than the quantity that minimizes average total cost. 
C)  less than the quantity that minimizes marginal cost. 
D)  more than the quantity that minimizes marginal cost. 
E)  None of the above answers is correct.

Question 9

The efficiency of monopolistic competition

Accepted Answer

A)  is as clear-cut as the efficiency of perfect competition. 
B)  depends on whether the gain from extra product variety offsets the selling costs and the extra cost that arises from excess capacity. 
C)  comes from its excess capacity. 
D)  is eliminated in the long run. 
E)  is equal to that of monopoly. 
A)  is as clear-cut as the efficiency of perfect competition. 
B)  depends on whether the gain from extra product variety offsets the selling costs and the extra cost that arises from excess capacity. 
C)  comes from its excess capacity. 
D)  is eliminated in the long run. 
E)  is equal to that of monopoly.

Question 10

The three largest firms in an industry have market shares of 40 percent,30 percent,and 2 percent.The remaining 47 firms in the industry each have a market share of 1 percent.The Herfindahl-Hirschman Index (HHI)for this industry is ________.

Accepted Answer

A)  2,551 
B)  5,184 
C)  24,061 
D)  10,000 
E)  3,013 
A)  2,551 
B)  5,184 
C)  24,061 
D)  10,000 
E)  3,013

Question 11

Monopolistic competition is defined as a type of market structure in which

Accepted Answer

A)  many firms produce the good. 
B)  firms produce a homogeneous good. 
C)  there are barriers to entry. 
D)  firms can make an economic profit in the long run. 
E)  firms can easily enter the market but cannot easily exit from it. 
A)  many firms produce the good. 
B)  firms produce a homogeneous good. 
C)  there are barriers to entry. 
D)  firms can make an economic profit in the long run. 
E)  firms can easily enter the market but cannot easily exit from it.

Question 12

Why does a firm in monopolistic competition make zero economic profit rather than an economic profit in the long run?

Accepted Answer

Entry into monopolistically competitive

Question 13

The Herfindahl-Hirschman Index measures market concentration in an industry by summing the square of the percentage market shares for

Accepted Answer

A)  the 4 largest firms. 
B)  the 50 smallest firms. 
C)  the 4 smallest firms. 
D)  the 50 largest firms. 
E)  all firms in the market. 
A)  the 4 largest firms. 
B)  the 50 smallest firms. 
C)  the 4 smallest firms. 
D)  the 50 largest firms. 
E)  all firms in the market.

Question 14

The square of the percentage market share of each firm summed over the 50 largest firms in a market is the

Accepted Answer

A)  elasticity of demand value. 
B)  elasticity of supply value. 
C)  Herfindahl-Hirschman Index. 
D)  four-firm concentration ratio. 
E)  fifty-firm concentration ratio. 
A)  elasticity of demand value. 
B)  elasticity of supply value. 
C)  Herfindahl-Hirschman Index. 
D)  four-firm concentration ratio. 
E)  fifty-firm concentration ratio.

Question 15

In the long run,firms in monopolistic competition make zero economic profit.When firms make zero economic profit,in the long run they exit the industry.

Accepted Answer

A)  The first sentence is correct and the second sentence is incorrect. 
B)  The first sentence is incorrect and the second sentence is correct. 
C)  Both sentences are correct. 
D)  Both sentences are incorrect. 
E)  More information about the presence or absence of barriers to entry and exit is needed to determine if the statements are true or false. 
A)  The first sentence is correct and the second sentence is incorrect. 
B)  The first sentence is incorrect and the second sentence is correct. 
C)  Both sentences are correct. 
D)  Both sentences are incorrect. 
E)  More information about the presence or absence of barriers to entry and exit is needed to determine if the statements are true or false.

Question 16

The figure above illustrates a firm's demand and marginal revenue curves and its cost curves.
-If the firm in the figure above attempted to minimize its average total cost by producing 100 pairs of Tommy jeans per day at an average total cost of $20 per pair and it sold those jeans for $80 per pair,the firm would ________.

Accepted Answer

A)  make zero economic profit 
B)  make a larger economic profit than a firm that produced 125 jeans because the ATC of producing 125 jeans is higher than the ATC of producing 100 jeans 
C)  incur an economic loss 
D)  make a smaller economic profit than a firm that produced 125 jeans 
E)  achieve an efficient use of resources 
A)  make zero economic profit 
B)  make a larger economic profit than a firm that produced 125 jeans because the ATC of producing 125 jeans is higher than the ATC of producing 100 jeans 
C)  incur an economic loss 
D)  make a smaller economic profit than a firm that produced 125 jeans 
E)  achieve an efficient use of resources

Question 17

Girlfriend's Salon is the only hair salon in Sunnyvale,a small town.Which of the following statements correctly describes a concentration measure for salons in Sunnyvale?

Accepted Answer

A)  The measure would incorrectly show an uncompetitive market structure because many firms could open in Sunnyvale without any restrictions. 
B)  The measure would incorrectly show an uncompetitive market because the measure does not reflect the low prices charged at Girlfriend's Salon. 
C)  The measure would correctly show a monopoly exists in town because there are so few residents. 
D)  The measure would correctly show a monopoly exists because Girlfriend's revenues are low. 
E)  The measure would incorrectly show a perfectly competitive market exists because new salons can open and compete with Girlfriend's. 
A)  The measure would incorrectly show an uncompetitive market structure because many firms could open in Sunnyvale without any restrictions. 
B)  The measure would incorrectly show an uncompetitive market because the measure does not reflect the low prices charged at Girlfriend's Salon. 
C)  The measure would correctly show a monopoly exists in town because there are so few residents. 
D)  The measure would correctly show a monopoly exists because Girlfriend's revenues are low. 
E)  The measure would incorrectly show a perfectly competitive market exists because new salons can open and compete with Girlfriend's.

Question 18

List four characteristics of monopolistic competition.

Accepted Answer

There are a large number firms; each pro

Question 19

The darkened area in the figure above is the

Accepted Answer

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

Question 20

When the Herfindahl-Hirschman Index for an industry is

Accepted Answer

A)  very small, the industry can be perfectly competitive. 
B)  very large, the industry can be perfectly competitive. 
C)  10,000, the industry is perfectly competitive. 
D)  very small, the industry can be a monopoly. 
E)  above 5,000, the industry is considered not very competitive, and when it is below 5,000, the industry is considered very competitive. 
A)  very small, the industry can be perfectly competitive. 
B)  very large, the industry can be perfectly competitive. 
C)  10,000, the industry is perfectly competitive. 
D)  very small, the industry can be a monopoly. 
E)  above 5,000, the industry is considered not very competitive, and when it is below 5,000, the industry is considered very competitive.

An industry with a large number of firms,differentiated products,and free entry and exit is called

For a firm in monopolistic competition,innovation and product development are

Firms attempt to create a consumer perception of product differentiation through i.packaging. ii.marketing. iii.advertising.

-The table above shows the revenue figures for a(n) market because its four-firm concentration ratio is percent.

In monopolistic competition in the long run,firms ________.

Which of the following four-firm concentration ratios would be the best indicator of an oligopoly?

Excess capacity exists when a firm produces

The efficiency of monopolistic competition

The three largest firms in an industry have market shares of 40 percent,30 percent,and 2 percent.The remaining 47 firms in the industry each have a market share of 1 percent.The Herfindahl-Hirschman Index (HHI)for this industry is ________.

Monopolistic competition is defined as a type of market structure in which

Why does a firm in monopolistic competition make zero economic profit rather than an economic profit in the long run?

The Herfindahl-Hirschman Index measures market concentration in an industry by summing the square of the percentage market shares for

The square of the percentage market share of each firm summed over the 50 largest firms in a market is the

In the long run,firms in monopolistic competition make zero economic profit.When firms make zero economic profit,in the long run they exit the industry.

Girlfriend's Salon is the only hair salon in Sunnyvale,a small town.Which of the following statements correctly describes a concentration measure for salons in Sunnyvale?

List four characteristics of monopolistic competition.

The darkened area in the figure above is the

When the Herfindahl-Hirschman Index for an industry is

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

An industry with a large number of firms,differentiated products,and free entry and exit is called

For a firm in monopolistic competition,innovation and product development are

Firms attempt to create a consumer perception of product differentiation through i.packaging. ii.marketing. iii.advertising.

-The table above shows the revenue figures for a(n)________ market because its four-firm concentration ratio is ________ percent.

In monopolistic competition in the long run,firms ________.

Which of the following four-firm concentration ratios would be the best indicator of an oligopoly?

Excess capacity exists when a firm produces

The efficiency of monopolistic competition

The three largest firms in an industry have market shares of 40 percent,30 percent,and 2 percent.The remaining 47 firms in the industry each have a market share of 1 percent.The Herfindahl-Hirschman Index (HHI)for this industry is ________.

Monopolistic competition is defined as a type of market structure in which

Why does a firm in monopolistic competition make zero economic profit rather than an economic profit in the long run?

The Herfindahl-Hirschman Index measures market concentration in an industry by summing the square of the percentage market shares for

The square of the percentage market share of each firm summed over the 50 largest firms in a market is the

In the long run,firms in monopolistic competition make zero economic profit.When firms make zero economic profit,in the long run they exit the industry.

Girlfriend's Salon is the only hair salon in Sunnyvale,a small town.Which of the following statements correctly describes a concentration measure for salons in Sunnyvale?

List four characteristics of monopolistic competition.

The darkened area in the figure above is the

When the Herfindahl-Hirschman Index for an industry is

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

-The table above shows the revenue figures for a(n) market because its four-firm concentration ratio is percent.