Question 1

In monopolistic competition,the entry of new firms

Accepted Answer

A)  shifts existing firms' demand curves rightward. 
B)  shifts existing firms' demand curves leftward. 
C)  only results in a movement along the existing firms' demand curves. 
D)  has no effect on the existing firms' demand curves. 
E)  shifts existing firms' supply curves rightward. 
A)  shifts existing firms' demand curves rightward. 
B)  shifts existing firms' demand curves leftward. 
C)  only results in a movement along the existing firms' demand curves. 
D)  has no effect on the existing firms' demand curves. 
E)  shifts existing firms' supply curves rightward.

Question 2

If firms in monopolistic competition are making economic profits,eventually

Accepted Answer

A)  they shut down. 
B)  they exit the industry. 
C)  the market turns into a monopoly. 
D)  new firms enter the industry. 
E)  the firms in the market increase their production so that their economic profit disappears. 
A)  they shut down. 
B)  they exit the industry. 
C)  the market turns into a monopoly. 
D)  new firms enter the industry. 
E)  the firms in the market increase their production so that their economic profit disappears.

Question 3

An example of a firm in monopolistic competition is

Accepted Answer

A)  your local water company. 
B)  the sole cable television company. 
C)  the many Chinese restaurants in San Francisco . 
D)  Kansas Power and Light, the sole provider of electricity in Kansas City. 
E)  Shaniq, a wheat farmer. 
A)  your local water company. 
B)  the sole cable television company. 
C)  the many Chinese restaurants in San Francisco . 
D)  Kansas Power and Light, the sole provider of electricity in Kansas City. 
E)  Shaniq, a wheat farmer.

Question 4

Product differentiation allows a firm to compete with another firm on the basis of

Accepted Answer

A)  efficiency. 
B)  elasticity. 
C)  quality, price, and marketing. 
D)  the level of output and the price. 
E)  demand. 
A)  efficiency. 
B)  elasticity. 
C)  quality, price, and marketing. 
D)  the level of output and the price. 
E)  demand.

Question 5

Firms decide how much to spend on product development and marketing by

Accepted Answer

A)  spending the same amount as they did in previous years. 
B)  spending the historical average of 1/4 of total production cost. 
C)  determining what it will take to eliminate excess capacity. 
D)  balancing the cost and the benefit of product development and marketing. 
E)  ensuring that the marginal cost of product development and marketing is less than or equal to the marginal cost of producing the good or service. 
A)  spending the same amount as they did in previous years. 
B)  spending the historical average of 1/4 of total production cost. 
C)  determining what it will take to eliminate excess capacity. 
D)  balancing the cost and the benefit of product development and marketing. 
E)  ensuring that the marginal cost of product development and marketing is less than or equal to the marginal cost of producing the good or service.

Question 6

In the long run,advertising by all firms in a monopolistically competitive industry

Accepted Answer

A)  increases all firms' demand. 
B)  decreases all firms' demand. 
C)  lowers all firms' costs. 
D)  might increase or decrease the firms' prices. 
E)  lowers all firms' prices. 
A)  increases all firms' demand. 
B)  decreases all firms' demand. 
C)  lowers all firms' costs. 
D)  might increase or decrease the firms' prices. 
E)  lowers all firms' prices.

Question 7

A differentiated product has

Accepted Answer

A)  many perfect substitutes. 
B)  no close substitutes. 
C)  no substitutes of any kind. 
D)  close but not perfect substitutes. 
E)  many different complements. 
A)  many perfect substitutes. 
B)  no close substitutes. 
C)  no substitutes of any kind. 
D)  close but not perfect substitutes. 
E)  many different complements.

Question 8

If a monopolistically competitive seller's marginal cost is $3.56,the firm will not change its output if

Accepted Answer

A)  its marginal revenue is less than $3.56. 
B)  its marginal revenue is equal to $3.56. 
C)  its marginal revenue is more than $3.56. 
D)  its average total cost is equal to $3.56. 
E)  Both answers B and D are correct. 
A)  its marginal revenue is less than $3.56. 
B)  its marginal revenue is equal to $3.56. 
C)  its marginal revenue is more than $3.56. 
D)  its average total cost is equal to $3.56. 
E)  Both answers B and D are correct.

Question 9

In monopolistic competition,the presence of a large number of firms making a differentiated product means that

Accepted Answer

A)  each firm can set the price of its particular product. 
B)  each firm must charge the same price. 
C)  the price is established by collusive behavior. 
D)  each firm must produce the same quantity. 
E)  firms cannot compete with each other on the basis of price. 
A)  each firm can set the price of its particular product. 
B)  each firm must charge the same price. 
C)  the price is established by collusive behavior. 
D)  each firm must produce the same quantity. 
E)  firms cannot compete with each other on the basis of price.

Question 10

An industry has only four firms,who have market shares of 45 percent,25 percent,20 percent,and 10 percent.What is the Herfindahl-Hirschman Index?

Accepted Answer

The Herfin

Question 11

Which of the following is TRUE about a firm in monopolistic competition in the long run?

Accepted Answer

A)  P = MC 
B)  P = MR 
C)  ATC = MC 
D)  P = ATC 
E)  MC = ATC 
A)  P = MC 
B)  P = MR 
C)  ATC = MC 
D)  P = ATC 
E)  MC = ATC

Question 12

Why are selling costs high in monopolistic competition?

Accepted Answer

In monopolistic competition,there are a

Question 13

A firm is spending the profit-maximizing amount on product development when

Accepted Answer

A)  people perceive the firm's product to be better than those of its competitors. 
B)  the marginal cost of product development is equal to the marginal revenue from product development. 
C)  the price of the good is higher than its marginal cost. 
D)  the advertising costs are covered. 
E)  the firm's total revenue exceeds its total costs. 
A)  people perceive the firm's product to be better than those of its competitors. 
B)  the marginal cost of product development is equal to the marginal revenue from product development. 
C)  the price of the good is higher than its marginal cost. 
D)  the advertising costs are covered. 
E)  the firm's total revenue exceeds its total costs.

Question 14

A monopolistically competitive firm is inefficient because the firm

Accepted Answer

A)  makes positive economic profit in the long run. 
B)  is producing at an output where marginal cost equals price. 
C)  is not maximizing its profits. 
D)  produces a product identical to that of its competitors. 
E)  produces at an output level where average total cost is not at its minimum. 
A)  makes positive economic profit in the long run. 
B)  is producing at an output where marginal cost equals price. 
C)  is not maximizing its profits. 
D)  produces a product identical to that of its competitors. 
E)  produces at an output level where average total cost is not at its minimum.

Question 15

If a large number of firms are competing,the market could be

Accepted Answer

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

Question 16

Firms in monopolistic competition

Accepted Answer

A)  face a downward-sloping demand curve. 
B)  cannot charge a markup because there are no dominant firms. 
C)  definitely do not benefit from advertising. 
D)  produce at the efficient scale in the long run. 
E)  generally have low to nonexistent selling costs. 
A)  face a downward-sloping demand curve. 
B)  cannot charge a markup because there are no dominant firms. 
C)  definitely do not benefit from advertising. 
D)  produce at the efficient scale in the long run. 
E)  generally have low to nonexistent selling costs.

Question 17

The freedom of entry and exit in monopolistic competition means that firms

Accepted Answer

A)  enter the market when economic losses are being incurred. 
B)  exit the market when economic profits are being made. 
C)  enter the market when firms are making zero economic profit. 
D)  can enter a market to compete for economic profits and leave when economic losses are being incurred. 
E)  find it easy to permanently make an economic profit. 
A)  enter the market when economic losses are being incurred. 
B)  exit the market when economic profits are being made. 
C)  enter the market when firms are making zero economic profit. 
D)  can enter a market to compete for economic profits and leave when economic losses are being incurred. 
E)  find it easy to permanently make an economic profit.

Question 18

Firms in monopolistic competition compete on
i.quality.
ii.price.
iii.marketing.

Accepted Answer

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

Question 19

If advertising increases the numbers of firms in an industry,each firm's demand

Accepted Answer

A)  increases. 
B)  does not change. 
C)  decreases. 
D)  might increase or decrease depending on whether the new firms produce exactly the same product or a product that is slightly differentiated. 
E)  None of the above answers is correct. 
A)  increases. 
B)  does not change. 
C)  decreases. 
D)  might increase or decrease depending on whether the new firms produce exactly the same product or a product that is slightly differentiated. 
E)  None of the above answers is correct.

Question 20

The U.S.Justice Department

Accepted Answer

A)  scrutinizes any merger of firms in a market in which the four-firm concentration exceeds 25 percent. 
B)  uses only the Herfindahl-Hirschman Index when considering whether to challenge a merger. 
C)  is likely to challenge a merger if the Herfindahl-Hirschman Index exceeds 1800. 
D)  Answers A and B are correct. 
E)  Answers B and C are correct. 
A)  scrutinizes any merger of firms in a market in which the four-firm concentration exceeds 25 percent. 
B)  uses only the Herfindahl-Hirschman Index when considering whether to challenge a merger. 
C)  is likely to challenge a merger if the Herfindahl-Hirschman Index exceeds 1800. 
D)  Answers A and B are correct. 
E)  Answers B and C are correct.

In monopolistic competition,the entry of new firms

If firms in monopolistic competition are making economic profits,eventually

An example of a firm in monopolistic competition is

Product differentiation allows a firm to compete with another firm on the basis of

Firms decide how much to spend on product development and marketing by

In the long run,advertising by all firms in a monopolistically competitive industry

A differentiated product has

If a monopolistically competitive seller's marginal cost is $3.56,the firm will not change its output if

In monopolistic competition,the presence of a large number of firms making a differentiated product means that

An industry has only four firms,who have market shares of 45 percent,25 percent,20 percent,and 10 percent.What is the Herfindahl-Hirschman Index?

Which of the following is TRUE about a firm in monopolistic competition in the long run?

Why are selling costs high in monopolistic competition?

A firm is spending the profit-maximizing amount on product development when

A monopolistically competitive firm is inefficient because the firm

If a large number of firms are competing,the market could be

Firms in monopolistic competition

The freedom of entry and exit in monopolistic competition means that firms

Firms in monopolistic competition compete on i.quality. ii.price. iii.marketing.

If advertising increases the numbers of firms in an industry,each firm's demand

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Exam 17: Monopolistic Competition

In monopolistic competition,the entry of new firms

If firms in monopolistic competition are making economic profits,eventually

An example of a firm in monopolistic competition is

Product differentiation allows a firm to compete with another firm on the basis of

Firms decide how much to spend on product development and marketing by

In the long run,advertising by all firms in a monopolistically competitive industry

A differentiated product has

If a monopolistically competitive seller's marginal cost is $3.56,the firm will not change its output if

In monopolistic competition,the presence of a large number of firms making a differentiated product means that

An industry has only four firms,who have market shares of 45 percent,25 percent,20 percent,and 10 percent.What is the Herfindahl-Hirschman Index?

Which of the following is TRUE about a firm in monopolistic competition in the long run?

Why are selling costs high in monopolistic competition?

A firm is spending the profit-maximizing amount on product development when

A monopolistically competitive firm is inefficient because the firm

If a large number of firms are competing,the market could be

Firms in monopolistic competition

The freedom of entry and exit in monopolistic competition means that firms

Firms in monopolistic competition compete on i.quality. ii.price. iii.marketing.

If advertising increases the numbers of firms in an industry,each firm's demand

The U.S.Justice Department

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