Question 1

If the market demand in a monopolistically competitive industry increases, a likely result in the long run will be

Accepted Answer

A)  less elastic demand curves facing each firm. 
B)  a higher ratio of price to average cost. 
C)  a larger number of firms producing a similar product. 
D)  a transition from monopolistic competition to oligopoly.

Question 2

In monopolistic competition, in the short run a firm maximizes its profit by selecting an output at which marginal cost equals

Accepted Answer

A)  average total cost. 
B)  marginal revenue. 
C)  price. 
D)  zero.

Question 3

-The above figure shows the demand and cost curves for a firm in monopolistic competition. In the figure, the firm makes an economic profit of

Accepted Answer

A)  $0. 
B)  $20. 
C)  $40. 
D)  $120.

Question 4

What is product differentiation? What market structure is characterized by product differentiation?

Accepted Answer

The answer of What is product differentiation? What market structure...

Question 5

A monopolistically competitive firm will end up selling its output for a price such that its

Accepted Answer

A)  price is greater than marginal cost. 
B)  price is equal to marginal cost. 
C)  price is equal to marginal revenue. 
D)  price is equal to average total cost.

Question 6

Under monopolistic competition, firms make zero economic profit in the long run and produce at the minimum ATC.

Accepted Answer

A) True 
 B)False

Question 7

Agave, Six Feet Under, Globe, Silk, Sotto Sotto and Zocalo are all restaurants in Atlanta. Suppose at the profit maximizing quantity, Zocalo charges $22 for each dinner entrée, and its ATC is equal to $24. What should Zocalo do?

Accepted Answer

A)  Cannot determine whether Zocalo should stay open or shut down in short run, but Zocalo should go out of business in the long run. 
B)  Produce in the short run and go out of business in the long run. 
C)  Shut down in the short run and go out of business in the long run. 
D)  Cannot determine whether Zocalo's should stay open or shut down in the short or long run.

Question 8

In monopolistic competition, firms do not have to produce innovative products because they have downward-sloping demand curves.

Accepted Answer

A) True 
 B)False

Question 9

-The above figure shows a firm in monopolistic competition. What is the profit maximizing level of output the firm will produce?

Accepted Answer

A)  4 units per day 
B)  8 units per day 
C)  10 units per day 
D)  16 units per day

Question 10

In the short run, a firm in monopolistic competition produces where MR = MC.

Accepted Answer

A) True 
 B)False

Question 11

When new firms enter a monopolistically competitive industry, each existing firm's

Accepted Answer

A)  demand curve shifts rightward. 
B)  demand curve shifts leftward. 
C)  marginal cost curve shifts rightward. 
D)  marginal cost curve shifts leftward.

Question 12

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

Accepted Answer

A)  A large number of firms compete. 
B)  Entry and exit is restricted. 
C)  Firms compete on product quality. 
D)  Firms compete on price.

Question 13

Advertising by firms in monopolistic competition

Accepted Answer

A)  provides consumers with no useful information. 
B)  does not occur. 
C)  can persuade customers that product differentiation exists. 
D)  wastes resources because the entry of rivals forces firms to be price takers.

Question 14

Explain how selling costs in monopolistic competition affect the efficiency of monopolistic competition.

Accepted Answer

The answer of Explain how selling costs in monopolistic competition...

Question 15

Explain why firms in monopolistic competition have excess capacity in the long run.

Accepted Answer

The answer of Explain why firms in monopolistic competition have...

Question 16

Graphically we can illustrate a firm with price setting ability by drawing its demand curve as ________.

Accepted Answer

A)  downward sloping 
B)  upward sloping 
C)  horizontal 
D)  vertical

Question 17

A textbook publisher is in monopolistic competition. If the firm spends nothing on advertising, it can sell no books at $100 a book, but for each $10 cut in price, the quantity of books it can sell increases by 20 books a day. The firm's total fixed cost is $2,400 a day. Its average variable cost and marginal cost is a constant $20 per book. If the firm spends $1,200 a day on advertising, it can increase the quantity of books sold at each price by 50 percent. If the publisher advertises, its profit maximizing level of output is

Accepted Answer

A)  120 books per day. 
B)  80 books per day. 
C)  160 books per day. 
D)  100 books per day.

Question 18

Which of the following is NOT a characteristic of the market structure for monopolistic competition?

Accepted Answer

A)  Firms are free to enter and exit. 
B)  Firms are price takers. 
C)  Firms compete on product quality, price, and marketing. 
D)  There are a large number of firms.

Question 19

Firms in monopolistic competition can make an economic profit in the long run.

Accepted Answer

A) True 
 B)False

Question 20

In monopolistic competition

Accepted Answer

A)  each firm's price can deviate from the average price of other firms. 
B)  each firm supplies a large part of the total market output. 
C)  one firm's actions directly affect the actions of the other firms. 
D)  firms typically determine the amount they produce through agreements with competitors.

Exam 14: Monopolistic Competition

If the market demand in a monopolistically competitive industry increases, a likely result in the long run will be

In monopolistic competition, in the short run a firm maximizes its profit by selecting an output at which marginal cost equals

-The above figure shows the demand and cost curves for a firm in monopolistic competition. In the figure, the firm makes an economic profit of

What is product differentiation? What market structure is characterized by product differentiation?

A monopolistically competitive firm will end up selling its output for a price such that its

Under monopolistic competition, firms make zero economic profit in the long run and produce at the minimum ATC.

Agave, Six Feet Under, Globe, Silk, Sotto Sotto and Zocalo are all restaurants in Atlanta. Suppose at the profit maximizing quantity, Zocalo charges $22 for each dinner entrée, and its ATC is equal to $24. What should Zocalo do?

In monopolistic competition, firms do not have to produce innovative products because they have downward-sloping demand curves.

-The above figure shows a firm in monopolistic competition. What is the profit maximizing level of output the firm will produce?

In the short run, a firm in monopolistic competition produces where MR = MC.

When new firms enter a monopolistically competitive industry, each existing firm's

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

Advertising by firms in monopolistic competition

Explain how selling costs in monopolistic competition affect the efficiency of monopolistic competition.

Explain why firms in monopolistic competition have excess capacity in the long run.

Graphically we can illustrate a firm with price setting ability by drawing its demand curve as ________.

Which of the following is NOT a characteristic of the market structure for monopolistic competition?

Firms in monopolistic competition can make an economic profit in the long run.

In monopolistic competition