Question 1

Since a monopolistically competitive firm faces a downward-sloping demand curve,its price will be _____ revenue.

Accepted Answer

A)   equal to marginal
B)   less than marginal
C)   greater than marginal
D)   equal to totalE) B) and C)
F) B) and D)

Question 2

Brand names offer some assurance that the seller has a reputation to protect and hopes to be engaged in repeated transactions with its customers.

Accepted Answer

A) True 
 B)False

Question 3

Suppose a monopolistically competitive firm can increase its profits by decreasing its output.At the current output:

Accepted Answer

A)   marginal revenue is less than zero.
B)   price is less than marginal revenue.
C)   marginal revenue is less than marginal cost.
D)   price is less than average total cost.E) A) and D)
F) B) and C)

Question 4

An industry characterized by many firms producing similar but differentiated products in a market with easy entry and exit is called:

Accepted Answer

A)   perfectly competitive.
B)   monopolistic.
C)   monopolistically competitive.
D)   oligopolistic.E) B) and D)
F) B) and C)

Question 5

Tacit collusion is not feasible in monopolistic competition because of the large number of competing firms.

Accepted Answer

A) True 
 B)False

Question 6

Industries that are made up of many competing producers,each selling a differentiated product,and whose firms earn zero economic profits in the long run are:

Accepted Answer

A)   perfectly competitive.
B)   monopolies.
C)   oligopolies.
D)   monopolistically competitive.E) A) and D)
F) A) and B)

Question 7

Use the following to answer questions :
Scenario: Monopolistically Competitive Firm
For a monopolistically competitive firm,the demand curve is given by Q = 160 - P,and the firm's cost functions are MC = 20 + 2Q and TC = 20Q + Q2 + 20.
-(Scenario: Monopolistically Competitive Firm) Use Scenario: Monopolistically Competitive Firm.Given the information in the scenario,what is the profit-maximizing price for this firm in the short run?

Accepted Answer

A)   $160
B)   $125
C)   $40
D)   $180E) A) and B)
F) A) and D)

Question 8

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

Question 9

Only firms with some market power will gain from individually advertising their product.

Accepted Answer

A) True 
 B)False

Question 10

The price in long-run equilibrium for a monopolistically competitive firm is _____ and the output is _____,compared with that of a perfectly competitive firm with an identical production function and cost curves.

Accepted Answer

A)   higher;higher
B)   higher;lower
C)   lower;higher
D)   lower;lowerE) B) and C)
F) None of the above

Question 11

In the long run,monopolistically competitive firms:

Accepted Answer

A)   produce at the level that minimizes average total cost.
B)   set marginal revenue equal to price.
C)   cannot earn an economic profit.
D)   produce such that marginal cost equals price.E) A) and C)
F) B) and C)

Question 12

Use the following to answer questions :
Figure: The Market for Gas Stations 1. B)  P2. C)  P3. D)  Not enough information is given to answer the question." class="answers-bank-image d-inline" rel="preload" >
-(Figure: The Market for Gas Stations) Use Figure: The Market for Gas Stations.Assume that the market for gas stations is characterized by many firms,differentiated products,easy entry,and easy exit.For the typical gas station,the profit-maximizing price would be:

Accepted Answer

A)   P1.
B)   P2.
C)   P3.
D)   Not enough information is given to answer the question.E) A) and D)
F) All of the above

Question 13

Use the following to answer questions :
Figure: The Restaurant Market 
-(Figure: The Restaurant Market) Use Figure: The Restaurant Market.The figure shows curves facing a typical restaurant.Assume that many firms,differentiated products,and easy entry and exit characterize the restaurant market.In long-run equilibrium,the economic profit earned by the typical restaurant in the community will be:

Accepted Answer

A)   negative.
B)   zero.
C)   equal to the level shown in the figure.
D)   Not enough information is given to answer the question.E) None of the above
F) B) and D)

Question 14

An industry characterized by many competitors,each producing identical products,with free entry and exit,is described as:

Accepted Answer

A)   monopolistically competitive.
B)   oligopolistic.
C)   perfectly competitive.
D)   monopolistic.E) A) and B)
F) None of the above

Question 15

Use the following to answer questions :
Figure: Monopolistic Competition II 
-(Figure: Monopolistic Competition II) Use Figure: Monopolistic Competition II.Which panel(s) in the figure show(s) a monopolistic competitor earning a profit in the short run?

Accepted Answer

A)   panel (a) only
B)   panel (b) only
C)   panel (c) only
D)   panels (a) and (c) E) A) and B)
F) A) and C)

Question 16

The best way for firms in monopolistic competition to gain market power is to engage in tacit collusion.

Accepted Answer

A) True 
 B)False

Question 17

Perfect competitors and monopolistic competitors both earn _____ economic profit in the long run,but perfect competitors produce at the _____ of the ATC curve,while monopolistic competitors produce _____ of the ATC curve.

Accepted Answer

A)   zero;minimum point;on the downward-sloping portion
B)   positive;minimum point;on the upward-sloping portion
C)   negative;minimum point;at the minimum point
D)   zero;downward-sloping portion;at the minimum pointE) None of the above
F) B) and D)

Question 18

When a monopolistically competitive industry earns economic profit,the result of competition among sellers is usually that:

Accepted Answer

A)   the price of the product increases to monopoly level.
B)   the price of the product quickly reaches the perfectly competitive level.
C)   firms in the industry gain market share.
D)   firms in the industry lose market share.E) None of the above
F) A) and B)

Question 19

An example of monopolistic competition is the _____ industry.

Accepted Answer

A)   restaurant
B)   soft drink
C)   automobile
D)   airlineE) C) and D)
F) None of the above

Question 20

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

Accepted Answer

A)   greater than average total cost.
B)   equal to average total cost at an output below 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 where average total cost is minimized.E) A) and B)
F) A) and C)

Exam 15: Monopolistic Competition

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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Correct Answer
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The best way for firms in monopolistic competition to gain market power is to engage in tacit collusion.

Correct Answer
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In long-run equilibrium in monopolistic competition,price is:

Correct Answer
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An industry characterized by many competitors,each producing identical products,with free entry and exit,is described as:

Correct Answer
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Since a monopolistically competitive firm faces a downward-sloping demand curve,its price will be _____ revenue.

Correct Answer
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Tacit collusion is not feasible in monopolistic competition because of the large number of competing firms.

Correct Answer
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Correct Answer
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Correct Answer
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When a monopolistically competitive industry earns economic profit,the result of competition among sellers is usually that:

Correct Answer
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Brand names offer some assurance that the seller has a reputation to protect and hopes to be engaged in repeated transactions with its customers.

Correct Answer
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Suppose a monopolistically competitive firm can increase its profits by decreasing its output.At the current output:

Correct Answer
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Industries that are made up of many competing producers,each selling a differentiated product,and whose firms earn zero economic profits in the long run are:

Correct Answer
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An industry characterized by many firms producing similar but differentiated products in a market with easy entry and exit is called:

Correct Answer
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An example of monopolistic competition is the _____ industry.

Correct Answer
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Only firms with some market power will gain from individually advertising their product.

Correct Answer
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Perfect competitors and monopolistic competitors both earn ___ economic profit in the long run,but perfect competitors produce at the _ of the ATC curve,while monopolistic competitors produce ___ of the ATC curve.

Correct Answer
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The price in long-run equilibrium for a monopolistically competitive firm is _ and the output is _,compared with that of a perfectly competitive firm with an identical production function and cost curves.

Correct Answer
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Use the following to answer questions : Figure: Monopolistic Competition II -(Figure: Monopolistic Competition II) Use Figure: Monopolistic Competition II.Which panel(s) in the figure show(s) a monopolistic competitor earning a profit in the short run?

Correct Answer
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In the long run,monopolistically competitive firms:

Correct Answer
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Exam 15: Monopolistic Competition

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

Correct AnswerverifiedShow Answer

The best way for firms in monopolistic competition to gain market power is to engage in tacit collusion.

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

An industry characterized by many competitors,each producing identical products,with free entry and exit,is described as:

Correct AnswerverifiedShow Answer

Since a monopolistically competitive firm faces a downward-sloping demand curve,its price will be _____ revenue.

Correct AnswerverifiedShow Answer

Tacit collusion is not feasible in monopolistic competition because of the large number of competing firms.

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

When a monopolistically competitive industry earns economic profit,the result of competition among sellers is usually that:

Correct AnswerverifiedShow Answer

Brand names offer some assurance that the seller has a reputation to protect and hopes to be engaged in repeated transactions with its customers.

Correct AnswerverifiedShow Answer

Suppose a monopolistically competitive firm can increase its profits by decreasing its output.At the current output:

Correct AnswerverifiedShow Answer

Industries that are made up of many competing producers,each selling a differentiated product,and whose firms earn zero economic profits in the long run are:

Correct AnswerverifiedShow Answer

An industry characterized by many firms producing similar but differentiated products in a market with easy entry and exit is called:

Correct AnswerverifiedShow Answer

An example of monopolistic competition is the _____ industry.

Correct AnswerverifiedShow Answer

Only firms with some market power will gain from individually advertising their product.

Correct AnswerverifiedShow Answer

Perfect competitors and monopolistic competitors both earn _____ economic profit in the long run,but perfect competitors produce at the _____ of the ATC curve,while monopolistic competitors produce _____ of the ATC curve.

Correct AnswerverifiedShow Answer

The price in long-run equilibrium for a monopolistically competitive firm is _____ and the output is _____,compared with that of a perfectly competitive firm with an identical production function and cost curves.

Correct AnswerverifiedShow Answer

Use the following to answer questions : Figure: Monopolistic Competition II -(Figure: Monopolistic Competition II) Use Figure: Monopolistic Competition II.Which panel(s) in the figure show(s) a monopolistic competitor earning a profit in the short run?

Correct AnswerverifiedShow Answer

In the long run,monopolistically competitive firms:

Correct AnswerverifiedShow Answer

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Perfect competitors and monopolistic competitors both earn ___ economic profit in the long run,but perfect competitors produce at the _ of the ATC curve,while monopolistic competitors produce ___ of the ATC curve.

Correct Answer
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The price in long-run equilibrium for a monopolistically competitive firm is _ and the output is _,compared with that of a perfectly competitive firm with an identical production function and cost curves.

Correct Answer
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Correct Answer
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Correct Answer
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