Question 1

If a monopolistically competitive firm is in long-run equilibrium,price:

Accepted Answer

A)   equals average total cost.
B)   equals marginal cost.
C)   equals marginal revenue.
D)   is greater than average total cost.E) B) and C)
F) B) and D)

Question 2

All advertising is clearly a waste of resources.

Accepted Answer

A) True 
 B)False

Question 3

Use the following to answer questions : 
-(Table: Spring Water) Use Table: Spring Water.The table shows the demand and cost data for a firm in a monopolistically competitive industry producing drinking water from underground springs.If the industry were in perfect competition,the profit-maximizing price in the long run would be:

Accepted Answer

A)   $10.00.
B)   $6.50.
C)   $8.38.
D)   $8.29.E) B) and D)
F) C) and D)

Question 4

Since a monopolistic competitor charges a price higher than marginal cost,there is a deadweight loss associated with monopolistic competition.

Accepted Answer

A) True 
 B)False

Question 5

The excess capacity in monopolistic competition may be viewed as:

Accepted Answer

A)   the cost of product diversity.
B)   efficient.
C)   the reason P = MR = MC in monopolistic competition.
D)   the advantage of monopolistic competition over monopoly.E) A) and B)
F) A) and C)

Question 6

Use the following to answer questions :
Figure: The Market for Gas Stations 
-General Snacks is a typical firm in a market characterized by monopolistic competition.Initially,the market is in long-run equilibrium,and then there is an increase in the market demand for snacks.In the short run,the price of snacks will _____ and the market output of snacks will _____.

Accepted Answer

A)   fall;fall
B)   remain unchanged;remain unchanged
C)   rise;fall
D)   rise;riseE) All of the above
F) B) and D)

Question 7

Suppose the dry-cleaning market is monopolistically competitive and economically profitable this year.In the long run,the demand for any one firm's dry-cleaning services will _____ as more firms enter the industry,causing economic profits to _____.

Accepted Answer

A)   decrease;become economic losses
B)   decrease;fall to zero
C)   not change;fall
D)   increase;increaseE) C) and D)
F) All of the above

Question 8

A wheat farmer is more likely to advertise than is a restaurant that sells fast-food hamburgers.

Accepted Answer

A) True 
 B)False

Question 9

The profit-maximizing rule,expressed as _____,is adhered to by firms operating in _____ markets.

Accepted Answer

A)   MC > MR;monopolistically competitive but not perfectly competitive
B)   MC = MR;both monopolistically competitive and perfectly competitive
C)   MC > MR;perfectly competitive but not monopolistically competitive
D)   MC = MR;perfectly competitive but not monopolistically competitiveE) B) and D)
F) A) and B)

Question 10

A monopolistically competitive firm has a downward-sloping demand curve for its product,primarily because:

Accepted Answer

A)   there are no barriers to entry or exit in the long run.
B)   there are many sellers in the industry.
C)   its product is differentiated.
D)   the price is greater than the marginal revenue.E) B) and D)
F) A) and B)

Question 11

Use the following to answer questions :
Figure: The Market for Gas Stations 
-(Figure: The Market for Gas Stations) Use Figure: The Market for Gas Stations.The figure shows curves facing a typical gas station in a large town.The market is characterized by many firms,differentiated products,easy entry,and easy exit.If the gas station here is typical,then in the long run,we would expect to observe:

Accepted Answer

A)   a few gas stations leaving the market.
B)   new gas stations entering the market.
C)   neither entry nor exit.
D)   many gas stations leaving the market.E) None of the above
F) B) and C)

Question 12

In long-run equilibrium in monopolistic competition,marginal cost is:

Accepted Answer

A)   greater than price.
B)   equal to price.
C)   less than price.
D)   related to price but not in a predictable way.E) A) and B)
F) All of the above

Question 13

Some economists think that advertising is a waste of resources because:

Accepted Answer

A)   rational consumers end up spending too little on brand names.
B)   consumers may buy things they do not need.
C)   advertising creates excess capacity.
D)   advertising leads to lower costs for goods and services.E) C) and D)
F) A) and B)

Question 14

A common example of monopolistic competition is the market for:

Accepted Answer

A)   mandarin oranges.
B)   cable TV service.
C)   automobiles.
D)   gasoline for cars.E) A) and B)
F) All of the above

Question 15

Use the following to answer questions :
Figure: Firms in Monopolistic Competition 
-(Figure: Firms in Monopolistic Competition) Use Figure: Firms in Monopolistic Competition.In panel (c) of the figure,the profit-maximizing quantity of output is determined by the intersection at point:

Accepted Answer

A)   U.
B)   V.
C)   W.
D)   X.E) A) and D)
F) C) and D)

Question 16

In long-run equilibrium in perfect competition,price is:

Accepted Answer

A)   greater than average total cost.
B)   equal to average total cost at an output below the point where average total cost is minimized.
C)   equal to average total cost at its minimum.
D)   equal to average total cost at an output above the point where average total cost is minimized.E) C) and D)
F) B) and C)

Question 17

When a monopolistically competitive firm is making zero economic profits,it is producing so that the average total cost curve is tangent to the demand curve.At this output:

Accepted Answer

A)   the firm is maximizing profits,and marginal cost must equal marginal revenue.
B)   the firm is not maximizing profits,and a slight increase or decrease in output will lead to positive profits.
C)   since economic profits are zero,the condition that marginal revenue equals marginal cost is irrelevant.
D)   the condition that marginal revenue equals marginal cost continues to be relevant,but the marginal revenue and marginal cost curves need not intersect directly below the point of tangency between the average total cost curve and the demand curve.E) B) and D)
F) B) and C)

Question 18

Monopolistically competitive firms produce less than the output at which average total cost is minimized in the long run.As a result,there is:

Accepted Answer

A)   irrational capacity.
B)   excess capacity.
C)   product differentiation.
D)   zero economic profit.E) B) and D)
F) All of the above

Question 19

In monopolistic competition:

Accepted Answer

A)   firms earn zero economic profits in the long run.
B)   each firm produces a product identical to that of every other firm in the industry.
C)   firms are aware of their strategic interdependence.
D)   firms earn large economic profits in the long run.E) B) and C)
F) A) and D)

Question 20

If a firm operating in monopolistic competition is producing a quantity that generates MC < MR,then the marginal decision rule tells us that profit:

Accepted Answer

A)   can be increased by increasing production.
B)   can be increased by decreasing production.
C)   can be increased by increasing the price.
D)   is maximized only if MC = P.E) A) and C)
F) B) and C)

Exam 15: Monopolistic Competition

Use the following to answer questions : Figure: Firms in Monopolistic Competition -(Figure: Firms in Monopolistic Competition) Use Figure: Firms in Monopolistic Competition.In panel (c) of the figure,the profit-maximizing quantity of output is determined by the intersection at point:

Correct Answer
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Correct Answer
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When a monopolistically competitive firm is making zero economic profits,it is producing so that the average total cost curve is tangent to the demand curve.At this output:

Correct Answer
verified

If a firm operating in monopolistic competition is producing a quantity that generates MC < MR,then the marginal decision rule tells us that profit:

Correct Answer
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All advertising is clearly a waste of resources.

Correct Answer
verified

Correct Answer
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Some economists think that advertising is a waste of resources because:

Correct Answer
verified

The excess capacity in monopolistic competition may be viewed as:

Correct Answer
verified

In long-run equilibrium in perfect competition,price is:

Correct Answer
verified

A wheat farmer is more likely to advertise than is a restaurant that sells fast-food hamburgers.

Correct Answer
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Since a monopolistic competitor charges a price higher than marginal cost,there is a deadweight loss associated with monopolistic competition.

Correct Answer
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In monopolistic competition:

Correct Answer
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Monopolistically competitive firms produce less than the output at which average total cost is minimized in the long run.As a result,there is:

Correct Answer
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Correct Answer
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Suppose the dry-cleaning market is monopolistically competitive and economically profitable this year.In the long run,the demand for any one firm's dry-cleaning services will _ as more firms enter the industry,causing economic profits to _.

Correct Answer
verified

If a monopolistically competitive firm is in long-run equilibrium,price:

Correct Answer
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The profit-maximizing rule,expressed as _,is adhered to by firms operating in _ markets.

Correct Answer
verified

In long-run equilibrium in monopolistic competition,marginal cost is:

Correct Answer
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A common example of monopolistic competition is the market for:

Correct Answer
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A monopolistically competitive firm has a downward-sloping demand curve for its product,primarily because:

Correct Answer
verified

Exam 15: Monopolistic Competition

Use the following to answer questions : Figure: Firms in Monopolistic Competition -(Figure: Firms in Monopolistic Competition) Use Figure: Firms in Monopolistic Competition.In panel (c) of the figure,the profit-maximizing quantity of output is determined by the intersection at point:

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

When a monopolistically competitive firm is making zero economic profits,it is producing so that the average total cost curve is tangent to the demand curve.At this output:

Correct AnswerverifiedShow Answer

If a firm operating in monopolistic competition is producing a quantity that generates MC < MR,then the marginal decision rule tells us that profit:

Correct AnswerverifiedShow Answer

All advertising is clearly a waste of resources.

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Some economists think that advertising is a waste of resources because:

Correct AnswerverifiedShow Answer

The excess capacity in monopolistic competition may be viewed as:

Correct AnswerverifiedShow Answer

In long-run equilibrium in perfect competition,price is:

Correct AnswerverifiedShow Answer

A wheat farmer is more likely to advertise than is a restaurant that sells fast-food hamburgers.

Correct AnswerverifiedShow Answer

Since a monopolistic competitor charges a price higher than marginal cost,there is a deadweight loss associated with monopolistic competition.

Correct AnswerverifiedShow Answer

In monopolistic competition:

Correct AnswerverifiedShow Answer

Monopolistically competitive firms produce less than the output at which average total cost is minimized in the long run.As a result,there is:

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Suppose the dry-cleaning market is monopolistically competitive and economically profitable this year.In the long run,the demand for any one firm's dry-cleaning services will _____ as more firms enter the industry,causing economic profits to _____.

Correct AnswerverifiedShow Answer

If a monopolistically competitive firm is in long-run equilibrium,price:

Correct AnswerverifiedShow Answer

The profit-maximizing rule,expressed as _____,is adhered to by firms operating in _____ markets.

Correct AnswerverifiedShow Answer

In long-run equilibrium in monopolistic competition,marginal cost is:

Correct AnswerverifiedShow Answer

A common example of monopolistic competition is the market for:

Correct AnswerverifiedShow Answer

A monopolistically competitive firm has a downward-sloping demand curve for its product,primarily because:

Correct AnswerverifiedShow Answer

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Correct Answer
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Correct Answer
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Suppose the dry-cleaning market is monopolistically competitive and economically profitable this year.In the long run,the demand for any one firm's dry-cleaning services will _ as more firms enter the industry,causing economic profits to _.

Correct Answer
verified

Correct Answer
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The profit-maximizing rule,expressed as _,is adhered to by firms operating in _ markets.

Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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