Question 1

Refer to the diagram. The monopolistically competitive firm shown

Accepted Answer

A)  will realize allocative efficiency at its profit-maximizing output.
B)  cannot operate at a loss.
C)  is in long-run equilibrium.
D)  is realizing an economic profit.E) All of the above
F) C) and D)

Question 2

A monopolistically competitive industry combines elements of both competition and monopoly. It is correct to say that the competitive element results from

Accepted Answer

A)  a relatively large number of firms, and the monopolistic element from product differentiation.
B)  product differentiation, and the monopolistic element from high entry barriers.
C)  a perfectly elastic demand curve, and the monopolistic element from low entry barriers.
D)  a highly inelastic demand curve, and the monopolistic element from advertising and product promotion.E) B) and D)
F) All of the above

Question 3

The entry of more firms into a monopolistically competitive market tends to increase the excess capacity of firms in the industry in the long run.

Accepted Answer

A) True 
 B)False

Question 4

In a monopolistically competitive market like restaurants, large capital-intensive firms like McDonald's may co-exist with more labor-intensive mom-and-pop shops. In this case, higher labor costs would tend to favor the survival of

Accepted Answer

A)  large-scale capital-intensive firms more than the small firms.
B)  small firms more than the large-scale capital-intensive firms.
C)  foreign firms more than the large-scale capital-intensive firms.
D)  domestic restaurant firms more than the foreign firms.E) B) and D)
F) A) and B)

Question 5

A monopolistically competitive firm is producing at an output level in the short run where average total cost is $4.00, price is $4.50, marginal revenue is $2.50, and marginal cost is $2.50. This firm is operating

Accepted Answer

A)  with a loss.
B)  with positive profits.
C)  at the break-even point.
D)  at a nonoptimal level of output.E) A) and D)
F) B) and C)

Question 6

Monopolistically competitive firms have some control over the price of their products.

Accepted Answer

A) True 
 B)False

Question 7

In the long run, a monopolistically competitive firm

Accepted Answer

A)  earns an economic profit.
B)  produces where P = ATC.
C)  produces where MR exceeds MC.
D)  achieves allocative efficiency.E) A) and C)
F) A) and B)

Question 8

Which of the following statements is correct?

Accepted Answer

A)  Purely competitive firms, monopolistically competitive firms, and pure monopolies all earn zero economic profits in the long run.
B)  Purely competitive firms, monopolistically competitive firms, and pure monopolies all earn positive economic profits in the long run.
C)  In the long run, purely competitive firms and monopolistically competitive firms earn zero economic profits, while pure monopolies may or may not earn economic profits.
D)  Monopolistically competitive firms earn zero economic profits in both the short run and the long run.E) A) and C)
F) All of the above

Question 9

The demand curve of a monopolistically competitive firm is more elastic than that of a pure monopolist.

Accepted Answer

A) True 
 B)False

Question 10

Long-run profits of individual firms in monopolistic competition will be larger than their short-run profits.

Accepted Answer

A) True 
 B)False

Question 11

In the long run, the representative firm in monopolistic competition tends to have

Accepted Answer

A)  excess capacity.
B)  economic profits.
C)  no product differentiation.
D)  a perfectly elastic demand curve.E) A) and B)
F) A) and C)

Question 12

Refer to the data. If all the firms in the industry merged into a single firm, the Herfindahl index would become

Accepted Answer

A)  100.
B)  1,000.
C)  10,000.
D)  100,000.E) A) and D)
F) A) and C)

Question 13

The stronger the product differentiation in monopolistic competition, the

Accepted Answer

A)  less elastic the demand curve, and production will take place further to the left of minimum average costs.
B)  less elastic the demand curve, and production will take place further to the right of minimum average costs.
C)  more elastic the demand curve, and production will take place further to the left of minimum average costs.
D)  more elastic the demand curve, and production will take place further to the right of minimum average costs.E) All of the above
F) A) and B)

Question 14

In the long run, the price charged by the monopolistically competitive firm attempting to maximize profits

Accepted Answer

A)  must be less than ATC.
B)  must be more than ATC.
C)  may be either equal to ATC, less than ATC, or more than ATC.
D)  will be equal to ATC.E) A) and D)
F) All of the above

Question 15

In monopolistic competition, short-run positive economic profits of firms in the market will cause the market demand to expand.

Accepted Answer

A) True 
 B)False

Question 16

In the short run, the price charged by a monopolistically competitive firm attempting to maximize profits

Accepted Answer

A)  must be less than ATC.
B)  must be more than ATC.
C)  may be either equal to ATC, less than ATC, or more than ATC.
D)  must be equal to ATC.E) None of the above
F) A) and B)

Question 17

In monopolistic competition, easy industry entry and exit drives long-run profits of firms to zero.

Accepted Answer

A) True 
 B)False

Question 18

Compared to pure competition, monopolistic competition

Accepted Answer

A)  provides greater product differentiation at the cost of lower productive efficiency.
B)  offers less product differentiation but attains a higher productive efficiency.
C)  provides greater product differentiation and achieves greater productive efficiency.
D)  offers less product differentiation and lower productive efficiency.E) B) and D)
F) A) and B)

Question 19

What are the goals of advertising?

Accepted Answer

The expense and effort involved in produ...

Question 20

Answer the question based on the demand and cost schedules for a monopolistically competitive firm given in the table below.  What output quantity will the monopolistically competitive firm produce to maximize profits?

Accepted Answer

A)  2
B)  3
C)  5
D)  6E) A) and D)
F) All of the above

Exam 13: Monopolistic Competition

A monopolistically competitive firm is producing at an output level in the short run where average total cost is $4.00, price is $4.50, marginal revenue is $2.50, and marginal cost is $2.50. This firm is operating

Correct AnswerverifiedShow Answer

In monopolistic competition, easy industry entry and exit drives long-run profits of firms to zero.

Correct AnswerverifiedShow Answer

Which of the following statements is correct?

Correct AnswerverifiedShow Answer

The stronger the product differentiation in monopolistic competition, the

Correct AnswerverifiedShow Answer

Long-run profits of individual firms in monopolistic competition will be larger than their short-run profits.

Correct AnswerverifiedShow Answer

In the long run, a monopolistically competitive firm

Correct AnswerverifiedShow Answer

The entry of more firms into a monopolistically competitive market tends to increase the excess capacity of firms in the industry in the long run.

Correct AnswerverifiedShow Answer

In the short run, the price charged by a monopolistically competitive firm attempting to maximize profits

Correct AnswerverifiedShow Answer

Refer to the diagram. The monopolistically competitive firm shown

Correct AnswerverifiedShow Answer

In a monopolistically competitive market like restaurants, large capital-intensive firms like McDonald's may co-exist with more labor-intensive mom-and-pop shops. In this case, higher labor costs would tend to favor the survival of

Correct AnswerverifiedShow Answer

Monopolistically competitive firms have some control over the price of their products.

Correct AnswerverifiedShow Answer

Compared to pure competition, monopolistic competition

Correct AnswerverifiedShow Answer

Refer to the data. If all the firms in the industry merged into a single firm, the Herfindahl index would become

Correct AnswerverifiedShow Answer

Answer the question based on the demand and cost schedules for a monopolistically competitive firm given in the table below. What output quantity will the monopolistically competitive firm produce to maximize profits?

Correct AnswerverifiedShow Answer

A monopolistically competitive industry combines elements of both competition and monopoly. It is correct to say that the competitive element results from

Correct AnswerverifiedShow Answer

The demand curve of a monopolistically competitive firm is more elastic than that of a pure monopolist.

Correct AnswerverifiedShow Answer

In monopolistic competition, short-run positive economic profits of firms in the market will cause the market demand to expand.

Correct AnswerverifiedShow Answer

In the long run, the price charged by the monopolistically competitive firm attempting to maximize profits

Correct AnswerverifiedShow Answer

In the long run, the representative firm in monopolistic competition tends to have

Correct AnswerverifiedShow Answer

What are the goals of advertising?

Correct AnswerverifiedThe expense and effort involved in produ...View AnswerShow Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified
The expense and effort involved in produ...
View Answer