Question 1

In monopolistic competition, the entry of new firms will cause all of the following to happen except

Accepted Answer

A)   Long-run economic profits will be zero.
B)   The industry cost curves will shift to the left.
C)   The firm's demand curve will shift to the left.
D)   The market supply curve will shift to the right.

Question 2

Which firm in Figure 26.5 is most likely a monopolistically competitive firm in the long run?

Accepted Answer

A)  Firm A
B)   Firm B
C)   Firm C
D)   Firm D

Question 3

Which of the following is not true about a monopolistic competitor?

Accepted Answer

A)   It maximizes profit at the point where MC = MR.
B)   It produces less output than a perfectly competitive firm, ceteris paribus.
C)   It charges a higher price than a perfectly competitive firm, ceteris paribus.
D)   It can earn economic profits in the long run.

Question 4

Concentration ratios for monopolistically competitive markets typically fall in the range of 70 to 100 percent.

Accepted Answer

A) True 
 B)False

Question 5

Modest shifts of the market marginal cost curve will have no impact on the production decision of a monopolistically competitive firm.

Accepted Answer

A) True 
 B)False

Question 6

When new firms enter a monopolistically competitive industry, the market

Accepted Answer

A)   Supply curve shifts to the left.
B)   Supply curve shifts to the right.
C)   Demand curve shifts to the left.
D)   Demand curve shifts to the right.

Question 7

Entry into a market characterized by monopolistic competition is generally

Accepted Answer

A)   Entirely blocked by existing firms.
B)   Very easy because few barriers exist.
C)   As difficult as in oligopoly.
D)   More difficult than entry into monopolized markets.

Question 8

A concentration ratio measures the

Accepted Answer

A)   Proportion of industry output produced by all firms.
B)   Proportion of industry output produced by the largest firms.
C)   Dollar value of total industry output produced by all firms.
D)   Dollar value of total industry output produced by the largest firms.

Question 9

Which of the following market structures will have lower output in the long run than perfect competition, ceteris paribus?

Accepted Answer

A)   Monopolistic competition, but not oligopoly or monopoly.
B)   Monopolistic competition, oligopoly, and monopoly.
C)   Monopolistic competition and oligopoly, but not monopoly.
D)   Oligopoly and monopoly, but not monopolistic competition.

Question 10

Advertising plays a role in reducing the cross-price elasticity of demand.

Accepted Answer

A) True 
 B)False

Question 11

If a monopolistically competitive firm raises its price, it will

Accepted Answer

A)   Not lose any of its customers.
B)   Lose most of its customers.
C)   Lose some of its customers, but nowhere close to all its customers.
D)   Lose all of its customers.

Question 12

Refer to Table 26.2. To maximize profit, Sylvie's Shampoo Company. should produce _______ bottles of shampoo and charge a price of _______ each.

Accepted Answer

A)   6; $22
B)   7; $20
C)   8; $18
D)   9; $16

Question 13

A distinguishing characteristic of monopolistic competition is that there are many firms in an industry.

Accepted Answer

A) True 
 B)False

Question 14

The competitive dimension of monopolistic competition is that

Accepted Answer

A)   High barriers to entry tend to push economic profits toward zero.
B)   Consumers view each firm's products as interchangeable.
C)   Low barriers to entry tend to push economic profits toward zero.
D)   Each firm in the industry will lose all of its customers if it raises its price.

Question 15

If economic profits are earned in a monopolistically competitive market,

Accepted Answer

A)   More firms will enter the market.
B)   The market supply curve will shift to the left.
C)   Price will rise.
D)   The market demand curve will shift to the right.

Question 16

Compared to the outcome under a marginal cost pricing strategy, a monopolistically competitive firm will produce a

Accepted Answer

A)   Lower output and charge a higher price.
B)   Greater output and charge a higher price.
C)   Lower output and charge a lower price.
D)   Greater output and charge a lower price.

Question 17

Refer to Table 26.1. In order to maximize profit, Will's Beach Ball Company should produce _______ and charge a price of _______ each.

Accepted Answer

A)   6 beach balls; $11
B)   7 beach balls; $10
C)   8 beach balls; $9
D)   9 beach balls; $8

Question 18

Which of the following characterizes the difference between oligopoly and monopolistic competition?

Accepted Answer

A)   Oligopolists are independent of each other; monopolistically competitive firms are interdependent.
B)   Monopolistically competitive firms experience zero long-run economic profit; oligopolists may experience positive long-run economic profit.
C)   There are many oligopolists but only a few monopolistically competitive firms.
D)   Monopolistically competitive firms face horizontal demand curves; oligopolists face downward-sloping demand curves.

Question 19

A World View article titled "The Best Global Brands" discusses the value of brand names. Establishing brand loyalty can do all of the following except

Accepted Answer

A)   Improve resource allocation efficiency.
B)   Decrease the price elasticity of demand for the product.
C)   Become a valuable economic asset.
D)   Increase demand for the product.

Question 20

Both perfect competitors and monopolistic competitors

Accepted Answer

A)   Experience product differentiation.
B)   Earn zero economic profit in the long run.
C)   Find prices pushed to the minimum of long-run ATC by entry.
D)   Use marginal cost pricing.

Exam 12: Deficits and Debt

If a monopolistically competitive firm raises its price, it will

Correct AnswerverifiedShow Answer

A concentration ratio measures the

Correct AnswerverifiedShow Answer

Modest shifts of the market marginal cost curve will have no impact on the production decision of a monopolistically competitive firm.

Correct AnswerverifiedShow Answer

Both perfect competitors and monopolistic competitors

Correct AnswerverifiedShow Answer

When new firms enter a monopolistically competitive industry, the market

Correct AnswerverifiedShow Answer

A distinguishing characteristic of monopolistic competition is that there are many firms in an industry.

Correct AnswerverifiedShow Answer

Which firm in Figure 26.5 is most likely a monopolistically competitive firm in the long run?

Correct AnswerverifiedShow Answer

The competitive dimension of monopolistic competition is that

Correct AnswerverifiedShow Answer

Compared to the outcome under a marginal cost pricing strategy, a monopolistically competitive firm will produce a

Correct AnswerverifiedShow Answer

Which of the following market structures will have lower output in the long run than perfect competition, ceteris paribus?

Correct AnswerverifiedShow Answer

In monopolistic competition, the entry of new firms will cause all of the following to happen except

Correct AnswerverifiedShow Answer

A World View article titled "The Best Global Brands" discusses the value of brand names. Establishing brand loyalty can do all of the following except

Correct AnswerverifiedShow Answer

Advertising plays a role in reducing the cross-price elasticity of demand.

Correct AnswerverifiedShow Answer

If economic profits are earned in a monopolistically competitive market,

Correct AnswerverifiedShow Answer

Concentration ratios for monopolistically competitive markets typically fall in the range of 70 to 100 percent.

Correct AnswerverifiedShow Answer

Entry into a market characterized by monopolistic competition is generally

Correct AnswerverifiedShow Answer

Refer to Table 26.1. In order to maximize profit, Will's Beach Ball Company should produce _______ and charge a price of _______ each.

Correct AnswerverifiedShow Answer

Which of the following is not true about a monopolistic competitor?

Correct AnswerverifiedShow Answer

Refer to Table 26.2. To maximize profit, Sylvie's Shampoo Company. should produce _______ bottles of shampoo and charge a price of _______ each.

Correct AnswerverifiedShow Answer

Which of the following characterizes the difference between oligopoly and monopolistic competition?

Correct AnswerverifiedShow 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

Refer to Table 26.1. In order to maximize profit, Will's Beach Ball Company should produce _ and charge a price of _ each.

Correct Answer
verified

Correct Answer
verified

Refer to Table 26.2. To maximize profit, Sylvie's Shampoo Company. should produce _ bottles of shampoo and charge a price of _ each.

Correct Answer
verified

Correct Answer
verified