Question 1

How does a firm in monopolistic competition determine its price and quantity? What type of profit can it make in the short run and the long run?

Accepted Answer

The firm produces where its marginal cos

Question 2

If all firms in the industry have similar demand,marginal revenue,and cost curves as the firm in the figure above,in the long run

Accepted Answer

A)  nothing changes. 
B)  some firms exit the industry, and the economic losses of the remaining firms decrease. 
C)  some firms exit the industry, and the economic profits of the remaining firms increase. 
D)  new firms enter the industry, and the economic losses of the original firms decrease. 
E)  new firms enter the industry, and the economic profits of the original firms increase. 
A)  nothing changes. 
B)  some firms exit the industry, and the economic losses of the remaining firms decrease. 
C)  some firms exit the industry, and the economic profits of the remaining firms increase. 
D)  new firms enter the industry, and the economic losses of the original firms decrease. 
E)  new firms enter the industry, and the economic profits of the original firms increase.

Question 3

A firm in monopolistic competition is similar to a firm in perfect competition because they both

Accepted Answer

A)  can make only zero economic profit in the long run. 
B)  can make only zero economic profit in the short run. 
C)  maximize their profits by producing where P = MR = MC. 
D)  Both answers A and C are correct. 
E)  Both answers B and C are correct. 
A)  can make only zero economic profit in the long run. 
B)  can make only zero economic profit in the short run. 
C)  maximize their profits by producing where P = MR = MC. 
D)  Both answers A and C are correct. 
E)  Both answers B and C are correct.

Question 4

In an industry with a large number of firms,

Accepted Answer

A)  each firm will produce a large quantity, relative to market demand. 
B)  one firm will dominate the market. 
C)  collusion is impossible. 
D)  competition is eliminated. 
E)  barriers to exit must exist. 
A)  each firm will produce a large quantity, relative to market demand. 
B)  one firm will dominate the market. 
C)  collusion is impossible. 
D)  competition is eliminated. 
E)  barriers to exit must exist.

Question 5

In monopolistic competition there

Accepted Answer

A)  are many firms and many buyers. 
B)  are several large firms. 
C)  is one large firm. 
D)  might be many, several, or one firm. 
E)  are many firms but only a few buyers. 
A)  are many firms and many buyers. 
B)  are several large firms. 
C)  is one large firm. 
D)  might be many, several, or one firm. 
E)  are many firms but only a few buyers.

Question 6

What does monopolistic competition have in common with perfect competition?

Accepted Answer

A)  a large number of firms and freedom of entry and exit 
B)  a standardized product 
C)  product differentiation 
D)  the ability to make an economic profit in the long run 
E)  barriers to exit but no barriers to entry 
A)  a large number of firms and freedom of entry and exit 
B)  a standardized product 
C)  product differentiation 
D)  the ability to make an economic profit in the long run 
E)  barriers to exit but no barriers to entry

Question 7

-The demand and cost schedules for a firm in monopolistic competition are in the above tables.What is the profit-maximizing level of output and price? What amount of profit is the firm making? Is this firm in a short-run or long-run equilibrium? Why?

Accepted Answer

To determine the quantity produced,the f

Question 8

The firm in the above figure has excess capacity of ________ meals per day.

Accepted Answer

A)  0 
B)  between 1 and 10 
C)  between 11 and 20 
D)  more than 21 and 30 
E)  more than 31 
A)  0 
B)  between 1 and 10 
C)  between 11 and 20 
D)  more than 21 and 30 
E)  more than 31

Question 9

When the firm in the figure above maximizes its profit,it makes an economic profit of

Accepted Answer

A)  $3,125. 
B)  $6,250. 
C)  $9,375. 
D)  $5,625. 
E)  None of the above answers is correct because the firm incurs an economic loss. 
A)  $3,125. 
B)  $6,250. 
C)  $9,375. 
D)  $5,625. 
E)  None of the above answers is correct because the firm incurs an economic loss.

Question 10

A firm in monopolistic competition is

Accepted Answer

A)  efficient because in the long run it makes zero economic profit. 
B)  efficient because it produces at the minimum average total cost. 
C)  inefficient because price exceeds marginal cost. 
D)  efficient because of the ease of entry. 
E)  efficient because it produces where MR = MC. 
A)  efficient because in the long run it makes zero economic profit. 
B)  efficient because it produces at the minimum average total cost. 
C)  inefficient because price exceeds marginal cost. 
D)  efficient because of the ease of entry. 
E)  efficient because it produces where MR = MC.

Question 11

What is excess capacity? What industry has excess capacity in the long run: perfect competition or monopolistic competition?

Accepted Answer

The efficient scale of output is the lev

Question 12

What is the difference between a four-firm concentration ratio and a Herfindahl-Hirschman Index?

Accepted Answer

A four-firm concentration ratio is the p

Question 13

Which of the following is true of monopolistic competition in long-run equilibrium?

Accepted Answer

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

Question 14

The Herfindahl-Hirschman Index is the ________ of the percentage market share of each firm summed over the largest 50 firms in a market.

Accepted Answer

A)  sum 
B)  square 
C)  square root 
D)  cube 
E)  negative 
A)  sum 
B)  square 
C)  square root 
D)  cube 
E)  negative

Question 15

In monopolistic competition,the products of different sellers are

Accepted Answer

A)  identical. 
B)  similar but slightly different. 
C)  unique without any close or perfect substitutes. 
D)  perfect substitutes. 
E)  either identical or differentiated. 
A)  identical. 
B)  similar but slightly different. 
C)  unique without any close or perfect substitutes. 
D)  perfect substitutes. 
E)  either identical or differentiated.

Question 16

Product differentiation involves making a product that is

Accepted Answer

A)  slightly different from the products of competing firms. 
B)  no different than the products of competing firms. 
C)  very different from the products of competing firms. 
D)  completely different from the products of competing firms. 
E)  cheaper than the products of competing firms. 
A)  slightly different from the products of competing firms. 
B)  no different than the products of competing firms. 
C)  very different from the products of competing firms. 
D)  completely different from the products of competing firms. 
E)  cheaper than the products of competing firms.

Question 17

In the long run,a firm in monopolistic competition will produce

Accepted Answer

A)  where average total cost is minimized. 
B)  where price equals average total cost, but average total cost is not at its minimum. 
C)  zero output. 
D)  any possible amount of output. 
E)  where price equals marginal cost. 
A)  where average total cost is minimized. 
B)  where price equals average total cost, but average total cost is not at its minimum. 
C)  zero output. 
D)  any possible amount of output. 
E)  where price equals marginal cost.

Question 18

-The figure above shows Firm X,a firm that is maximizing profit.The firm is making an economic ________ because it produces ________ units and charges ________ per unit.

Accepted Answer

A)  loss; 100; $20 
B)  profit; 100; $10 
C)  profit; 100; $30 
D)  loss; 120; $28 
E)  loss; 110; $20 
A)  loss; 100; $20 
B)  profit; 100; $10 
C)  profit; 100; $30 
D)  loss; 120; $28 
E)  loss; 110; $20

Question 19

Because of product differentiation,firms

Accepted Answer

A)  do not have to compete because their products are unique. 
B)  cannot compete on price. 
C)  can compete on the basis of quality. 
D)  are unable to compete by using advertising. 
E)  must compete on only price. 
A)  do not have to compete because their products are unique. 
B)  cannot compete on price. 
C)  can compete on the basis of quality. 
D)  are unable to compete by using advertising. 
E)  must compete on only price.

Question 20

Which of the following statements about product development in monopolistic competition is correct?
i.Firms in monopolistic competition undertake too much product development for efficiency.
ii.Firms in monopolistic competition undertake too little product development for efficiency.
iii.Product development might allow the firm to make a temporary economic profit.

Accepted Answer

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

How does a firm in monopolistic competition determine its price and quantity? What type of profit can it make in the short run and the long run?

If all firms in the industry have similar demand,marginal revenue,and cost curves as the firm in the figure above,in the long run

A firm in monopolistic competition is similar to a firm in perfect competition because they both

In an industry with a large number of firms,

In monopolistic competition there

What does monopolistic competition have in common with perfect competition?

-The demand and cost schedules for a firm in monopolistic competition are in the above tables.What is the profit-maximizing level of output and price? What amount of profit is the firm making? Is this firm in a short-run or long-run equilibrium? Why?

The firm in the above figure has excess capacity of ________ meals per day.

When the firm in the figure above maximizes its profit,it makes an economic profit of

A firm in monopolistic competition is

What is excess capacity? What industry has excess capacity in the long run: perfect competition or monopolistic competition?

What is the difference between a four-firm concentration ratio and a Herfindahl-Hirschman Index?

Which of the following is true of monopolistic competition in long-run equilibrium?

The Herfindahl-Hirschman Index is the ________ of the percentage market share of each firm summed over the largest 50 firms in a market.

In monopolistic competition,the products of different sellers are

Product differentiation involves making a product that is

In the long run,a firm in monopolistic competition will produce

-The figure above shows Firm X,a firm that is maximizing profit.The firm is making an economic because it produces units and charges per unit.

Because of product differentiation,firms

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

How does a firm in monopolistic competition determine its price and quantity? What type of profit can it make in the short run and the long run?

If all firms in the industry have similar demand,marginal revenue,and cost curves as the firm in the figure above,in the long run

A firm in monopolistic competition is similar to a firm in perfect competition because they both

In an industry with a large number of firms,

In monopolistic competition there

What does monopolistic competition have in common with perfect competition?

-The demand and cost schedules for a firm in monopolistic competition are in the above tables.What is the profit-maximizing level of output and price? What amount of profit is the firm making? Is this firm in a short-run or long-run equilibrium? Why?

The firm in the above figure has excess capacity of ________ meals per day.

When the firm in the figure above maximizes its profit,it makes an economic profit of

A firm in monopolistic competition is

What is excess capacity? What industry has excess capacity in the long run: perfect competition or monopolistic competition?

What is the difference between a four-firm concentration ratio and a Herfindahl-Hirschman Index?

Which of the following is true of monopolistic competition in long-run equilibrium?

The Herfindahl-Hirschman Index is the ________ of the percentage market share of each firm summed over the largest 50 firms in a market.

In monopolistic competition,the products of different sellers are

Product differentiation involves making a product that is

In the long run,a firm in monopolistic competition will produce

-The figure above shows Firm X,a firm that is maximizing profit.The firm is making an economic ________ because it produces ________ units and charges ________ per unit.

Because of product differentiation,firms

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 figure above shows Firm X,a firm that is maximizing profit.The firm is making an economic because it produces units and charges per unit.