Question 1

Figure 10.9 
-Refer to Figure 10.9.The graph in the figure that depicts a monopolistically competitive firm that is minimising its losses is

Accepted Answer

A) Panel A 
B) Panel B 
C) Panel C 
D) Panel A and Panel C

Question 2

Economists believe that consumers would be better off if markets were perfectly competitive rather than monopolistically competitive.

Accepted Answer

A) True 
 B)False

Question 3

Discuss the role of product differentiation and advertising in monopolistic competition.
__________________________________________________________________________________________________________________________________________________________________________________________

Accepted Answer

The answer of Discuss the role of product differentiation and...

Question 4

Figure 10.14 
-Refer to Figure 10.14.The area that represents the firm's profit is

Accepted Answer

A) profit = 0 
B) P4edP2 
C) P4eaP1 
D) P3baP2

Question 5

If some monopolistically competitive firms exit their market after suffering short-run losses, the demand curves of remaining firms will shift to the right.

Accepted Answer

A) True 
 B)False

Question 6

What do the entry and exit of firms in monopolistically competitive market guarantee

Accepted Answer

A) that marginal revenue equals marginal cost, and average total cost is minimised. 
B) that firms can earn economic profits in the long run. 
C) that price equals average total cost in the long run. 
D) that firms can earn economic profits in the short run.

Question 7

Which of the following statements is true?

Accepted Answer

A) The marginal revenue of a monopolistically competitive firm will be positive at high prices and negative at low prices. 
B) Because the demand curve for a monopolistically competitive firm is downward sloping, its marginal revenue will be negative. 
C) The marginal revenue of a monopolistically competitive firm will be always be positive. 
D) The marginal revenue of a monopolistically competitive firm will be positive at low prices and negative at high prices.

Question 8

Which of the following is true of trademarks?

Accepted Answer

A) A successful trademark is one that becomes a generic name for a product, for example, 'Xerox' has become a generic term for making photocopies. 
B) A successful trademark is one that allows consumers to immediately identify the source or producer of the product. 
C) If a firm is granted a trademark, then no other firms can legally produce similar products for a given period of time. 
D) If a firm is granted a trademark, then no other firms can legally sell in the same geographic area for a given period of time.

Question 9

Which is true of a firm faces a downward-sloping demand curve?

Accepted Answer

A) The demand for its product must be inelastic. 
B) It can control both price and quantity sold. 
C) It must reduce its price to sell more units. 
D) It will always make a profit.

Question 10

Figure 10.7  Figure 10.7 shows short-run cost and demand curves for a monopolistically competitive firm in the footwear market.
-Refer to Figure 10.7.Which of the following statements describes the best course of action for the firm depicted in the diagram?

Accepted Answer

A) The firm should exit the industry because its price is less than its average total cost. 
B) The firm should minimise its losses by producing Qy units and charging a price of P0. 
C) The firm should minimise its losses by producing Qy units and charging a price of P2. 
D) The firm should minimise its losses by producing Qy units and charging a price of P1.

Question 11

Sparkle, one of many firms in the market for toothpaste, is in long-run equilibrium.Sparkle has a small market share and has been in business for a long time.
a.Identify the market structure in which Sparkle operates.Explain your answer.
b.What is Sparkle's profit or loss? Explain your answer.If you cannot determine the profit or loss, explain what information is missing.
c.Draw a diagram showing Sparkle's demand curve, marginal revenue curve, average total cost curve and marginal cost curve.Label your diagram.
__________________________________________________________________________________________________________________________________________________________________________________________

Accepted Answer

The answer of Sparkle, one of many firms in the...

Question 12

The characteristic below that is not common to monopolistic competition and perfect competition is

Accepted Answer

A) Firms act to maximise profit. 
B) Entry barriers into the industry are low. 
C) The market demand curve is downward sloping. 
D) Firms take market prices as given.

Question 13

Figure 10.17 
-Refer to Figure 10.17.The amount of excess capacity is

Accepted Answer

A) Qh - Qf units 
B) Qj - Qf units 
C) Qj - Qh units 
D) Qh - Qg units

Question 14

If the demand curve for a firm is downward sloping, its marginal revenue curve

Accepted Answer

A) will lie above the demand curve. 
B) will lie below the demand curve. 
C) is the same as the demand curve. 
D) is horizontal.

Question 15

Figure 10.12 
-Refer to Figure 10.12.The monopolistic competitor's profit-maximising output is

Accepted Answer

A) Q1 units 
B) Q2 units 
C) Q3 units 
D) Q4 units

Question 16

If a monopolistically competitive firm breaks even, the firm

Accepted Answer

A) is earning an accounting profit and will have to pay taxes on that profit. 
B) is earning zero accounting and zero economic profit. 
C) should advertise its product to stimulate demand. 
D) should expand production.

Question 17

Consumers in monopolistically competitive markets face a trade-off between paying prices greater than marginal costs and purchasing products that are more closely suited to their tastes.

Accepted Answer

A) True 
 B)False

Question 18

Table 10.3  Table 10.3 shows the demand and cost schedules for a monopolistically competitive firm.
-Refer to Table 10.3.The amount of the firm's loss at its optimal output level is

Accepted Answer

A) $0 
B) $41 
C) $45 
D) $50

Question 19

Which of the following is a disadvantage of trademarking a firm's product?

Accepted Answer

A) A trademark differentiates a firm's product. 
B) A trademark conveys information about the product to the public. 
C) A trademark may become so widely used to denote a particular type of product that the trademark may no longer be a legally protected brand name. 
D) A trademark does not affect demand for the firm's product.

Question 20

Despite being in a market with ________, from the mid-1990s to the mid-2000s Starbucks was able to significantly differentiate its products from the products of its competitors.

Accepted Answer

A) few barriers to entry 
B) significant barriers to entry 
C) blocked entry 
D) no barriers to entry

Exam 10: Monopolistic Competition: The Competitive Model in a More Realistic

Figure 10.9 -Refer to Figure 10.9.The graph in the figure that depicts a monopolistically competitive firm that is minimising its losses is

Economists believe that consumers would be better off if markets were perfectly competitive rather than monopolistically competitive.

Discuss the role of product differentiation and advertising in monopolistic competition. __________________________________________________________________________________________________________________________________________________________________________________________

Figure 10.14 -Refer to Figure 10.14.The area that represents the firm's profit is

If some monopolistically competitive firms exit their market after suffering short-run losses, the demand curves of remaining firms will shift to the right.

What do the entry and exit of firms in monopolistically competitive market guarantee

Which of the following statements is true?

Which of the following is true of trademarks?

Which is true of a firm faces a downward-sloping demand curve?

Figure 10.7 Figure 10.7 shows short-run cost and demand curves for a monopolistically competitive firm in the footwear market. -Refer to Figure 10.7.Which of the following statements describes the best course of action for the firm depicted in the diagram?

The characteristic below that is not common to monopolistic competition and perfect competition is

Figure 10.17 -Refer to Figure 10.17.The amount of excess capacity is

If the demand curve for a firm is downward sloping, its marginal revenue curve

Figure 10.12 -Refer to Figure 10.12.The monopolistic competitor's profit-maximising output is

If a monopolistically competitive firm breaks even, the firm

Consumers in monopolistically competitive markets face a trade-off between paying prices greater than marginal costs and purchasing products that are more closely suited to their tastes.

Table 10.3 Table 10.3 shows the demand and cost schedules for a monopolistically competitive firm. -Refer to Table 10.3.The amount of the firm's loss at its optimal output level is

Which of the following is a disadvantage of trademarking a firm's product?

Despite being in a market with ________, from the mid-1990s to the mid-2000s Starbucks was able to significantly differentiate its products from the products of its competitors.