Question 1

When weighing the efficiency of monopolistic competition, which of the following should be considered?
I∙The information provided by advertising
Ii∙Product variety
Iii∙The extra cost of excess capacity

Accepted Answer

A)  ii only
B)  i and iii
C)  ii and iii
D)  i, ii, and iii
E)  iii only

Question 2

"One of the defining features of monopolistic competition is product variety." Is the previous statement correct or incorrect?

Accepted Answer

The statement is correct.In mo...

Question 3

A firm in monopolistic competition is

Accepted Answer

A)  efficient because in the long run it makes zero economic profit.
B)  efficient because it produces at the minimum average total cost.
C)  inefficient because price exceeds marginal cost.
D)  efficient because of the ease of entry.
E)  efficient because it produces where MR = MC.

Question 4

Which of the following is an advantage to society of monopolistic competition?

Accepted Answer

A)  production at the lowest possible average cost
B)  product variety
C)  Only essential costs are incurred.
D)  long-run profitability
E)  The firms have excess capacity so they are are always willing to increase their production.

Question 5

If all firms in the industry have similar demand, marginal revenue, and cost curves as the firm in the figure above, in the long run

Accepted Answer

A)  nothing changes.
B)  some firms exit the industry and the economic losses of the remaining firms decrease.
C)  some firms exit the industry and the economic profits of the remaining firms increase.
D)  new firms enter the industry and the economic losses of the original firms decrease.
E)  new firms enter the industry and the economic profits of the original firms increase.

Question 6

Monopolistic competition is judged to be economically inefficient because

Accepted Answer

A)  the price is greater than marginal cost.
B)  firms make zero economic profit in the long run.
C)  marginal revenue equals marginal cost.
D)  firms have deficient capacity in the long run.
E)  firms make an economic profit in the long run.

Question 7

Product differentiation means

Accepted Answer

A)  firms sell products that are very dissimilar.
B)  products sold by different firms are slightly different.
C)  charging a higher price to consumers with high willingness to pay.
D)  charging a lower price to consumers with low willingness to pay.
E)  that a single firm sells many different types of products.

Question 8

Why are firms in monopolistic competition unable to make an economic profit in the long run?

Accepted Answer

While firms in monopolistic competition ...

Question 9

Because economic profits are eliminated in the long run in monopolistic competition, to make an economic profit firms continuously

Accepted Answer

A)  shut down.
B)  exit the industry.
C)  develop and market new products.
D)  declare bankruptcy.
E)  decrease their costs by decreasing their selling costs.

Question 10

An industry with a large number of firms, differentiated products, and free entry and exit is called

Accepted Answer

A)  perfect competition.
B)  monopolistic competition.
C)  oligopoly.
D)  monopoly.
E)  monopolistic oligopoly.

Question 11

In the long run, firms in monopolistic competition make zero economic profit.When firms make zero economic profit, in the long run hey exit the industry.

Accepted Answer

A)  The first sentence is correct and the second sentence is incorrect.
B)  The first sentence is incorrect and the second sentence is correct.
C)  Both sentences are correct.
D)  Both sentences are incorrect.
E)  More information about the presence or absence of barriers to entry and exit is needed to determine if the statements are true or false.

Question 12

A firm in monopolistic competition has ________ demand curve.

Accepted Answer

A)  a downward sloping
B)  an upward sloping
C)  a vertical
D)  a horizontal
E)  a U-shaped

Question 13

If the four-firm concentration ratio for the market for diapers is 73 percent, then this industry is best characterized as

Accepted Answer

A)  a monopoly.
B)  monopolistic competition.
C)  an oligopoly.
D)  perfect competition.
E)  either a monopoly or monopolistic competition.

Question 14

What type of profit can a firm in monopolistic competition make in the long run? Explain your answer.

Accepted Answer

In the long run, a firm in monopolistic ...

Question 15

If a firm is maximizing its profit and producing less than the output at which its average total cost is minimized, then that firm

Accepted Answer

A)  must be suffering an economic loss.
B)  must be earning an economic profit.
C)  has excess capacity.
D)  is producing at its capacity output.
E)  must be earning a normal profit.

Question 16

The clothing industry has many firms with differentiated products and no barriers to entry.The cereal industry has a few firms with either identical or differentiated products and moderate barriers to entry. The food industry is characterized as ________ and the cereal industry is characterized as ________.

Accepted Answer

A)  perfect competition; monopolistic competition
B)  monopolistic competition; oligopoly
C)  oligopoly; monopolistic competition
D)  perfect competition; perfect competition
E)  monopolistic competition; monopoly

Question 17

One characteristic of monopolistic competition is that it has

Accepted Answer

A)  many firms producing a slightly differentiated product.
B)  many firms producing identical goods.
C)  one firm producing a unique good.
D)  a few firms producing a slightly differentiated product.
E)  large barriers to entry.

Question 18

-The above figure shows a motel engaged in monopolistic competition with other motels.The equilibrium quantity at this motel is ________ rooms per day.

Accepted Answer

A)  200
B)  300
C)  400
D)  500
E)  100

Question 19

As a firm in monopolistic competition sets the price for its product, the firm faces a tradeoff between

Accepted Answer

A)  supply and demand.
B)  efficiency and equity.
C)  internal and external economies of scale.
D)  price and the quantity it can sell.
E)  its marginal revenue and its price.

Question 20

-Kevin owns a personal training gymnasium in Orlando.The above figure shows the demand and cost curves for his firm, which competes in a monopolistically competitive market.What price will Kevin charge per session?

Accepted Answer

A)  $100
B)  $60
C)  $40
D)  $20
E)  $80

Exam 17: Monopolistic Competition

A firm in monopolistic competition is

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Product differentiation means

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If all firms in the industry have similar demand, marginal revenue, and cost curves as the firm in the figure above, in the long run

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What type of profit can a firm in monopolistic competition make in the long run? Explain your answer.

Correct AnswerverifiedIn the long run, a firm in monopolistic ...View AnswerShow Answer

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-Kevin owns a personal training gymnasium in Orlando.The above figure shows the demand and cost curves for his firm, which competes in a monopolistically competitive market.What price will Kevin charge per session?

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"One of the defining features of monopolistic competition is product variety." Is the previous statement correct or incorrect?

Correct AnswerverifiedThe statement is correct.In mo...View AnswerShow Answer

-The above figure shows a motel engaged in monopolistic competition with other motels.The equilibrium quantity at this motel is ________ rooms per day.

Correct AnswerverifiedShow Answer

An industry with a large number of firms, differentiated products, and free entry and exit is called

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One characteristic of monopolistic competition is that it has

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When weighing the efficiency of monopolistic competition, which of the following should be considered? I∙The information provided by advertising Ii∙Product variety Iii∙The extra cost of excess capacity

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Which of the following is an advantage to society of monopolistic competition?

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Why are firms in monopolistic competition unable to make an economic profit in the long run?

Correct AnswerverifiedWhile firms in monopolistic competition ...View AnswerShow Answer

A firm in monopolistic competition has ________ demand curve.

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If a firm is maximizing its profit and producing less than the output at which its average total cost is minimized, then that firm

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Because economic profits are eliminated in the long run in monopolistic competition, to make an economic profit firms continuously

Correct AnswerverifiedShow Answer

As a firm in monopolistic competition sets the price for its product, the firm faces a tradeoff between

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In the long run, firms in monopolistic competition make zero economic profit.When firms make zero economic profit, in the long run hey exit the industry.

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Monopolistic competition is judged to be economically inefficient because

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If the four-firm concentration ratio for the market for diapers is 73 percent, then this industry is best characterized as

Correct AnswerverifiedShow Answer

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In the long run, a firm in monopolistic ...
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The statement is correct.In mo...
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While firms in monopolistic competition ...
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