Question 1

Which of the following is a strategy(ies)used by firms in monopolistically competitive industries to convince consumers that their product is better than their rivals' products?

Accepted Answer

A)  Comparative advertising 
B)  Niche marketing 
C)  Equity marketing 
D)  Comparative advertising or niche marketing

Question 2

Would you expect the demand for a monopolistically competitive firm's product to be more or less elastic than that for a monopolist's product?

Accepted Answer

The answer of Would you expect the demand for a...

Question 3

In a competitive industry with identical firms,long-run equilibrium is characterized by:

Accepted Answer

A)  P > AC. 
B)  P < MC. 
C)  MR = MC. 
D)  MR < P.

Question 4

You are the manager of a monopolistically competitive firm.The inverse demand for your product is given by P = 200 - 10Q and your marginal cost is MC = 5 + Q.
a.What is the profit-maximizing level of output?
b.What is the profit-maximizing price?
c.What are the maximum profits?
d.What do you expect to happen to the demand for your product in the long run?

Accepted Answer

The answer of You are the manager of a monopolistically...

Question 5

Let the demand function for a product be Q = 50 − 5P.The inverse demand function of this demand function is:

Accepted Answer

A)  Q = 25 + P 
B)  P = 10 − 0.2Q 
C)  P = 10 + 0.2Q 
D)  P = 50 − 0.2Q

Question 6

The first-order conditions for a monopoly to maximize profits are:

Accepted Answer

A)  dR(Q)/dQ = dC(Q)/dQ. 
B)  MR(Q) = MC(Q). 
C)  dF1F1F1S1F1F1F10(Q)/dQ = 0. 
D)  All of the statements associated with this question are correct.

Question 7

Which of the following is an example of monopoly?

Accepted Answer

A)  Shoe industry in the United States 
B)  Local utility industry in a small town 
C)  Newspaper industry in New York City 
D)  Bread industry in New York City

Question 8

Which of the following is true under monopoly?

Accepted Answer

A)  Profits are always positive. 
B)  P > MC. 
C)  P = MR. 
D)  All of the choices are true for monopoly.

Question 9

SeaSide Industries currently spends 5 percent of its sales on advertising.Suppose that the elasticity of advertising for Seaside is 0.2.Determine the optimal profit margin over price (P − MC)/P.

Accepted Answer

A)  4 percent 
B)  10 percent 
C)  25 percent 
D)  None of the preceding answers is correct.

Question 10

In a monopoly where the marginal revenue and price are,respectively,given by $10 and $20,the price elasticity of demand is:

Accepted Answer

A)  −1. 
B)  −2. 
C)  −0.5. 
D)  Cannot be determined based on the information in the question.

Question 11

You are the manager of a firm that sells its product in a competitive market at a price of $40.Your firm's cost function is C = 60 + 4Q2.Your firm's maximum profits are:

Accepted Answer

A)  36. 
B)  60. 
C)  40. 
D)  80.

Question 12

You are the manager of a monopoly that faces a demand curve described by P = 85 − 5Q.Your costs are C = 20 + 5Q.The profit-maximizing output for your firm is:

Accepted Answer

A)  6. 
B)  5. 
C)  7. 
D)  8.

Question 13

You are the manager of a monopoly that faces a demand curve described by P = 230 − 20Q.Your costs are C = 5 + 30Q.The profit-maximizing output for your firm is:

Accepted Answer

A)  4. 
B)  5. 
C)  6. 
D)  7.

Question 14

Which of the following conditions must hold to ensure that profits are,in fact,at a maximum?

Accepted Answer

A)  d(MC(Q))/dQ > 0 
B)  d(MC(Q))/dQ 2F1F1F1S1F1F1F10(Q)/dQ2  0 and d2F1F1F1S1F1F1F10(Q)/dQ2 < 0

Question 15

"Monopolistic competition is literally a kind of competition.Hence,there is no deadweight loss in a monopolistically competitive market."

Accepted Answer

A)  The statement is by definition correct but empirically incorrect. 
B)  The statement is correct. 
C)  The statement is incorrect. 
D)  None of the preceding answers is correct.

Question 16

Compute the marginal revenue when the price elasticity of demand is −0.10.

Accepted Answer

A)  −9P, meaning marginal revenue is negative and 9 times greater than price. 
B)  9P, meaning marginal revenue is positive and 9 times greater than price. 
C)  −3P, meaning marginal revenue is negative and 3 times greater than price. 
D)  3P, meaning marginal revenue is positive and 3 times greater than price.

Question 17

You are the manager of a firm that sells its product in a competitive market at a price of $50.Your firm's cost function is C = 40 + 5Q2.Your firm's maximum profits are:

Accepted Answer

A)  125. 
B)  250. 
C)  100. 
D)  85.

Question 18

Let the demand function for a product be Q = 100 − 2P.The inverse demand function of this demand function is:

Accepted Answer

A)  Q = 100 + 2P. 
B)  P = 50 − 0.5Q. 
C)  P = 50 + 0.5Q. 
D)  None of the preceding answers is correct.

Question 19

The number of efficient plants compatible with domestic consumption of the refrigerator industry in Sweden is 0.7.Which of the following implications is (are)correct?

Accepted Answer

A)  In the absence of imports, the refrigerator industry in Sweden is monopolistic. 
B)  The refrigerator industry in Sweden is perfectly competitive. 
C)  The refrigerator industry in Sweden is monopolistically competitive. 
D)  None of the preceding answers is correct.

Question 20

You are the manager of a firm that produces output in two plants.The demand for your firm's product is P = 78 − 15Q,where Q = Q1 + Q2.The marginal costs associated with producing in the two plants are MC1 = 3Q1 and MC2 = 2Q2.What price should be charged to maximize profits?

Accepted Answer

A)  $20.5 
B)  $40.5 
C)  $60.5 
D)  $80.5

Exam 8: Managing in Competitive, Monopolistic, and Monopolistically Competitive Markets

Which of the following is a strategy(ies) used by firms in monopolistically competitive industries to convince consumers that their product is better than their rivals' products?