Question 1

If buyers of a monopolistically competitive product feel the products of different sellers are strongly differentiated, then the demand for each seller's product is

Accepted Answer

A)  perfectly inelastic. 
B)  perfectly elastic. 
C)  relatively inelastic. 
D)  relatively elastic.

Question 2

Which of the following characterizes the market that Starbucks competes in?

Accepted Answer

A)  All coffeehouses face horizontal demand curves. 
B)  Coffeehouses sell identical products. 
C)  Barriers to entry are low. 
D)  There are a small number of firms.

Question 3

Figure 13-4  Figure 13-4 shows short-run cost and demand curves for a monopolistically competitive firm in the market for designer watches.
-Refer to Figure 13-4. If the firm represented in the diagram is currently producing and selling Qa units, what is the price charged?

Accepted Answer

A)  P0 
B)  P1 
C)  P2 
D)  P3

Question 4

What are the key factors that determine the profitability of a firm in a monopolistically competitive market?

Accepted Answer

The answer of What are the key factors that determine...

Question 5

A monopolistically competitive firm earning profits in the short run will find the demand for its product decreasing and becoming more elastic in the long run as new firms move into the industry until

Accepted Answer

A)  the original firm is driven into bankruptcy. 
B)  the firm's demand curve is perfectly elastic. 
C)  the firm's demand curve is tangent to its average total cost curve. 
D)  the firm exits the market.

Question 6

In the long-run equilibrium, both the perfectly competitive firm and the monopolistically competitive firm produce the output at which MR = MC and charge a price equal to the average total cost of production.

Accepted Answer

A) True 
 B)False

Question 7

Why are demand and marginal revenue represented by the same curve for a firm in a perfectly competitive market, but by separate curves for a firm in a monopolistically competitive market?

Accepted Answer

The answer of Why are demand and marginal revenue represented...

Question 8

The marginal revenue of a monopolistically competitive firm

Accepted Answer

A)  cannot be negative because the price the firm charges will always be greater than zero. 
B)  can be negative if the firm charges a high price. 
C)  can be negative if the firm charges a low price. 
D)  will equal average revenue.

Question 9

A monopolistically competitive firm should lower its price if its marginal revenue exceeds its marginal cost.

Accepted Answer

A) True 
 B)False

Question 10

Brand management refers to

Accepted Answer

A)  picking a brand name for a new product that will attract attention. 
B)  the efforts to maintain the differentiation of a product over time. 
C)  efforts to reduce the cost of production. 
D)  selling the right to use a brand name in a particular market.

Question 11

Does the fact that monopolistically competitive firms do not achieve productive efficiency or allocative efficiency mean that there is a significant loss in consumer welfare?

Accepted Answer

The answer of Does the fact that monopolistically competitive firms...

Question 12

Monopolistically competitive firms face a perfectly elastic demand curve.

Accepted Answer

A) True 
 B)False

Question 13

In the United States, the average person mostly patronizes firms that operate in

Accepted Answer

A)  perfectly competitive markets. 
B)  monopolistically competitive markets. 
C)  oligopoly markets. 
D)  monopoly markets.

Question 14

Monopolistically competitive firms have downward-sloping demand curves. In the long run, monopolistically competitive firms earn zero economic profits. These two characteristics imply that in the long run,

Accepted Answer

A)  monopolistically competitive markets achieve productive efficiency. 
B)  monopolistically competitive markets achieve allocative efficiency. 
C)  monopolistically competitive firms earn economic profits. 
D)  monopolistically competitive firms have excess capacity.

Question 15

If a store like hhgregg has higher costs than a comparable Best Buy store, the only way it can have higher profits is if

Accepted Answer

A)  it has more locations than Best Buy. 
B)  its marginal revenue is lower than Best Buy's. 
C)  the demand for its goods is higher than Best Buy's. 
D)  it sells the quantity associated with its minimum average total cost.

Question 16

When a firm faces a downward-sloping demand curve, marginal revenue

Accepted Answer

A)  must exceed price because the price effect outweighs the output effect. 
B)  is less than price because a firm must lower its price to sell more. 
C)  equals price because the firm sells a standardized product. 
D)  must exceed price because the output effect outweighs the price effect.

Question 17

Figure 13-11 
-Refer to Figure 13-11. The firm represented in the diagram

Accepted Answer

A)  makes zero economic profit. 
B)  makes zero accounting profit. 
C)  should exit the industry. 
D)  should expand its output to take advantage of economies of scale.

Question 18

In the long-run equilibrium, a monopolistically competitive firm earning normal profit produces the allocatively efficient output level.

Accepted Answer

A) True 
 B)False

Question 19

If a monopolistically competitive firm breaks even, the firm is earning as much in this industry as it could in any other comparable industry.

Accepted Answer

A) True 
 B)False

Question 20

For allocative efficiency to hold,

Accepted Answer

A)  price must equal marginal revenue of the last unit sold. 
B)  price must equal the marginal cost of the last unit produced. 
C)  average variable cost is minimized in production. 
D)  average total cost is minimized in production.

Exam 13: Monopolistic Competition: the Competitive Model in a More Realistic Setting

If buyers of a monopolistically competitive product feel the products of different sellers are strongly differentiated, then the demand for each seller's product is

Which of the following characterizes the market that Starbucks competes in?

Figure 13-4 Figure 13-4 shows short-run cost and demand curves for a monopolistically competitive firm in the market for designer watches. -Refer to Figure 13-4. If the firm represented in the diagram is currently producing and selling Qa units, what is the price charged?

What are the key factors that determine the profitability of a firm in a monopolistically competitive market?

A monopolistically competitive firm earning profits in the short run will find the demand for its product decreasing and becoming more elastic in the long run as new firms move into the industry until

In the long-run equilibrium, both the perfectly competitive firm and the monopolistically competitive firm produce the output at which MR = MC and charge a price equal to the average total cost of production.

Why are demand and marginal revenue represented by the same curve for a firm in a perfectly competitive market, but by separate curves for a firm in a monopolistically competitive market?

The marginal revenue of a monopolistically competitive firm

A monopolistically competitive firm should lower its price if its marginal revenue exceeds its marginal cost.

Brand management refers to

Does the fact that monopolistically competitive firms do not achieve productive efficiency or allocative efficiency mean that there is a significant loss in consumer welfare?

Monopolistically competitive firms face a perfectly elastic demand curve.

In the United States, the average person mostly patronizes firms that operate in

Monopolistically competitive firms have downward-sloping demand curves. In the long run, monopolistically competitive firms earn zero economic profits. These two characteristics imply that in the long run,

If a store like hhgregg has higher costs than a comparable Best Buy store, the only way it can have higher profits is if

When a firm faces a downward-sloping demand curve, marginal revenue

Figure 13-11 -Refer to Figure 13-11. The firm represented in the diagram

In the long-run equilibrium, a monopolistically competitive firm earning normal profit produces the allocatively efficient output level.

If a monopolistically competitive firm breaks even, the firm is earning as much in this industry as it could in any other comparable industry.

For allocative efficiency to hold,