Question 1

A textbook publisher is in monopolistic competition. If the firm spends nothing on advertising, it can sell no books at $100 a book, but for each $10 cut in price, the quantity of books it can sell increases by 20 books a day. The firm's total fixed cost is $2,400 a day. Its average variable cost and marginal cost is a constant $20 per book. If the firm spends $1,200 a day on advertising, it can increase the quantity of books sold at each price by 50 percent. Compared to the situation if it does not advertise, if the firm advertises, its economic profit

Accepted Answer

A)   increases by $400.
B)   decreases by $400.
C)   doubles.
D)   is the same as with no advertising.

Question 2

In the long run, monopolistically competitive firms make zero economic profits because of government regulations.

Accepted Answer

A) True 
 B)False

Question 3

Which of the following best explains why monopolistically competitive firms face a downward sloping demand curve while perfectly competitive firms do not?

Accepted Answer

A)   Monopolistically competitive firms sell a differentiated good.
B)   Monopolistically competitive industries have only a few firms.
C)   Monopolistically competitive firms have barriers to entry.
D)   Only industries with free entry and exit have firms that face horizontal demand curves.

Question 4

La Super Rica is a taco stand in Santa Barbara, California. It is popular with the locals and even the late Julia Child found the food delicious. Suppose La Super Rica maximizes its profit. If La Super Rica's lunch price is greater than its average total cost, which of the following statements is NOT true?

Accepted Answer

A)   La Super Rica is producing at its efficient scale.
B)   La Super Rica is making an economic profit.
C)   La Super Rica is producing a quantity where marginal revenue equals marginal cost.
D)   La Super Rica has excess capacity.

Question 5

-The figure above shows a monopolistically competitive firm in the short run. During the transition to the long run, the demand curve will shift ________ and the MR curve will shift ________.

Accepted Answer

A)   leftward; leftward
B)   leftward; rightward
C)   rightward; leftward
D)   rightward; rightward

Question 6

In monopolistic competition, firms can make an economic profit in

Accepted Answer

A)   the short run and in the long run.
B)   the short run but not in the long run.
C)   the long run but not in the short run.
D)   neither the long run nor the short run.

Question 7

In monopolistic competition:

Accepted Answer

A)   Each firm's price can deviate from the average price of other firms.
B)   Each firm supplies a large part of the total market output.
C)   One firm's actions directly affect the actions of the other firms.
D)   Firms typically determine the amount they produce through agreements with competitors.

Question 8

The efficient scale of a firm is defined as the point where

Accepted Answer

A)   average total cost is minimized.
B)   marginal revenue equals marginal cost.
C)   price equals marginal cost.
D)   marginal revenue equals zero.

Question 9

The monopolistically competitive firm

Accepted Answer

A)   cannot make a positive economic profit in the long run because of entry.
B)   can make a positive economic profit in the long run because it sells a differentiated good.
C)   can make a positive economic profit in the long run because there are only a few firms in the industry.
D)   cannot make a positive economic profit in the long run because it sells a homogeneous good.

Question 10

A monopolistically competitive firm and a monopoly are alike because both I. face downward sloping demand curves.
II)  have marginal revenue curves that lie beneath their demand curves.
III)  can make an economic profit in the long run.

Accepted Answer

A)   I only.
B)   I and II.
C)   I, II, and III.
D)   I and III.

Question 11

Which of the following is true regarding the long run for a firm in monopolistic competition?

Accepted Answer

A)   The firm can make an economic profit because of product differentiation.
B)   Marginal cost equals average total cost.
C)   Output is produced at minimum average total cost.
D)   Price equals average total cost.

Question 12

Brand name aspirin is chemically identical to store brand aspirin. Yet, consumers often prefer the brand name product to the store brand product. This preference is an example of

Accepted Answer

A)   product differentiation.
B)   perfect product competition.
C)   oligopolistic product competition.
D)   price taking behavior.

Question 13

Monopolistically competitive firms engaging in advertising will definitely achieve which of the following?

Accepted Answer

A)   shift their average total cost curve up
B)   shift their demand curve to the right
C)   increase their economic profit
D)   shift their demand curve to the right and shift their average total cost curve up

Question 14

The figure shows the demand curve for Nike shoes (D) , and Nike's marginal revenue curve (MR) , marginal cost curve (MC) , and average total cost curve (ATC) .
-In the figure above, Nike maximizes its profit if it sells ________ pairs of shoes per day.

Accepted Answer

A)   120
B)   87
C)   137
D)   150

Question 15

Under monopolistic competition, firms make zero economic profit in the long run and produce at the minimum ATC.

Accepted Answer

A) True 
 B)False

Question 16

In the December edition of Runner's World magazine, Karhu, Adidas, The North Face, and Brooks have full page running shoe advertisements. Which of the following is correct? I. Advertising increases Oris's total cost.
II)  Advertising increases Oris's fixed costs.
III)  All the advertising makes the demand curve faced by Oris more elastic.

Accepted Answer

A)   Only I
B)   Only II
C)   I, II, and III
D)   Only I and II

Question 17

In monopolistic competition, profit is maximized when the amount produced is such that

Accepted Answer

A)   marginal revenue equals marginal cost.
B)   marginal revenue is greater than marginal cost.
C)   total revenue equals total cost.
D)   total revenue is maximized.

Question 18

For a firm in monopolistic competition, the marginal cost curve intersects the average total cost curve

Accepted Answer

A)   at the minimum average total cost.
B)   to the left of the minimum average total cost.
C)   to the right of the minimum average total cost.
D)   at no point.

Question 19

A monopoly firm can make economic profit in the long run. A firm in monopolistic competition cannot. What creates this difference?

Accepted Answer

The key to long-run economic profits is ...

Question 20

In monopolistic competition, excess capacity results from

Accepted Answer

A)   the presence of a large number of buyers.
B)   the mobility of firms into and out of the industry.
C)   imperfect information about price.
D)   product differentiation.

Exam 14: Monopolistic Competition

-The figure above shows a monopolistically competitive firm in the short run. During the transition to the long run, the demand curve will shift and the MR curve will shift .

Correct Answer
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In monopolistic competition, profit is maximized when the amount produced is such that

Correct Answer
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Correct Answer
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Which of the following best explains why monopolistically competitive firms face a downward sloping demand curve while perfectly competitive firms do not?

Correct Answer
verified

A monopolistically competitive firm and a monopoly are alike because both I. face downward sloping demand curves. II) have marginal revenue curves that lie beneath their demand curves. III) can make an economic profit in the long run.

Correct Answer
verified

The figure shows the demand curve for Nike shoes (D) , and Nike's marginal revenue curve (MR) , marginal cost curve (MC) , and average total cost curve (ATC) . -In the figure above, Nike maximizes its profit if it sells ________ pairs of shoes per day.

Correct Answer
verified

In monopolistic competition, excess capacity results from

Correct Answer
verified

In monopolistic competition, firms can make an economic profit in

Correct Answer
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The monopolistically competitive firm

Correct Answer
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For a firm in monopolistic competition, the marginal cost curve intersects the average total cost curve

Correct Answer
verified

The efficient scale of a firm is defined as the point where

Correct Answer
verified

Which of the following is true regarding the long run for a firm in monopolistic competition?

Correct Answer
verified

Monopolistically competitive firms engaging in advertising will definitely achieve which of the following?

Correct Answer
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Correct Answer
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Brand name aspirin is chemically identical to store brand aspirin. Yet, consumers often prefer the brand name product to the store brand product. This preference is an example of

Correct Answer
verified

Under monopolistic competition, firms make zero economic profit in the long run and produce at the minimum ATC.

Correct Answer
verified

Correct Answer
verified

In monopolistic competition:

Correct Answer
verified

In the long run, monopolistically competitive firms make zero economic profits because of government regulations.

Correct Answer
verified

A monopoly firm can make economic profit in the long run. A firm in monopolistic competition cannot. What creates this difference?

Correct Answer
verified
The key to long-run economic profits is ...
View Answer

Exam 14: Monopolistic Competition

-The figure above shows a monopolistically competitive firm in the short run. During the transition to the long run, the demand curve will shift ________ and the MR curve will shift ________.

Correct AnswerverifiedShow Answer

In monopolistic competition, profit is maximized when the amount produced is such that

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Which of the following best explains why monopolistically competitive firms face a downward sloping demand curve while perfectly competitive firms do not?

Correct AnswerverifiedShow Answer

A monopolistically competitive firm and a monopoly are alike because both I. face downward sloping demand curves. II) have marginal revenue curves that lie beneath their demand curves. III) can make an economic profit in the long run.

Correct AnswerverifiedShow Answer

The figure shows the demand curve for Nike shoes (D) , and Nike's marginal revenue curve (MR) , marginal cost curve (MC) , and average total cost curve (ATC) . -In the figure above, Nike maximizes its profit if it sells ________ pairs of shoes per day.

Correct AnswerverifiedShow Answer

In monopolistic competition, excess capacity results from

Correct AnswerverifiedShow Answer

In monopolistic competition, firms can make an economic profit in

Correct AnswerverifiedShow Answer

The monopolistically competitive firm

Correct AnswerverifiedShow Answer

For a firm in monopolistic competition, the marginal cost curve intersects the average total cost curve

Correct AnswerverifiedShow Answer

The efficient scale of a firm is defined as the point where

Correct AnswerverifiedShow Answer

Which of the following is true regarding the long run for a firm in monopolistic competition?

Correct AnswerverifiedShow Answer

Monopolistically competitive firms engaging in advertising will definitely achieve which of the following?

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Brand name aspirin is chemically identical to store brand aspirin. Yet, consumers often prefer the brand name product to the store brand product. This preference is an example of

Correct AnswerverifiedShow Answer

Under monopolistic competition, firms make zero economic profit in the long run and produce at the minimum ATC.

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

In monopolistic competition:

Correct AnswerverifiedShow Answer

In the long run, monopolistically competitive firms make zero economic profits because of government regulations.

Correct AnswerverifiedShow Answer

A monopoly firm can make economic profit in the long run. A firm in monopolistic competition cannot. What creates this difference?

Correct AnswerverifiedThe key to long-run economic profits is ...View AnswerShow Answer

-The figure above shows a monopolistically competitive firm in the short run. During the transition to the long run, the demand curve will shift and the MR curve will shift .

Correct Answer
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Correct Answer
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The key to long-run economic profits is ...
View Answer