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In monopolistic competition, which of the following would make an individual firm's demand curve less elastic?


A) the purchase of more efficient machinery
B) an increase in the price of the firm's product
C) increased brand loyalty toward the firm's product
D) an increase in the number of rival firms

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Answer the question on the basis of the following demand and cost data for a specific firm. \quad \quad \quad \quad Demand Data \text { Demand Data } \quad \quad \quad  Cost Data \text { Cost Data } (1) (2) (3)  Total  Price  Price  Quanti  Outpu  Cost  ty  t 11.0$10.066$61009.998.8577629.008.0088648.007.0099677.106.101010726.005.001111795.154.15121286\begin{array}{|c|c|c|c|c|}\hline(1) &(2) &(3) &&\text { Total } \\\text { Price }&\text { Price }&\text { Quanti }&\text { Outpu }&\text { Cost } \\&&\text { ty }& \text { t }\\\hline 11.0 & \$ 10.0 & 6 & 6 & \$ 61 \\0 & 0 & & & \\\hline 9.99 & 8.85 & 7 & 7 & 62 \\\hline 9.00 & 8.00 & 8 & 8 & 64 \\\hline 8.00 & 7.00 & 9 & 9 & 67 \\\hline 7.10 & 6.10 & 10 & 10 & 72 \\\hline 6.00 & 5.00 & 11 & 11 & 79 \\\hline 5.15 & 4.15 & 12 & 12 & 86 \\\hline\end{array} With the demand schedule shown by columns (2) and (3) , in long-run equilibrium


A) price will equal average total cost.
B) total cost will exceed total revenue.
C) marginal cost will exceed price.
D) price will equal marginal revenue.

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Firms in an industry will not earn long-run economic profits if


A) fixed costs are zero.
B) the number of firms in the industry is fixed.
C) there is free entry and exit of firms in the industry.
D) production costs for a given level of output are minimized.

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The goal of product differentiation and advertising in monopolistic competition is to make


A) the firm allocatively efficient even if it is not productively efficient.
B) the firm productively efficient even if it is not allocatively efficient.
C) price less of a factor and product differences more of a factor in consumer purchases.
D) price more of a factor and product differences less of a factor in consumer purchases.

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Economic analysis of a monopolistically competitive industry is more complicated than that of pure competition because


A) of product differentiation and consequent product promotion activities.
B) monopolistically competitive firms cannot realize an economic profit in the long run.
C) the number of firms in the industry is larger.
D) monopolistically competitive producers use strategic pricing strategies to combat rivals.

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(Last Word) Raising the minimum wage in the restaurant industry


A) affects mom and pop and chain restaurants about the same.
B) benefits both mom and pop and chain restaurants by boosting demand.
C) makes it more difficult for mom and pop restaurants to compete with highly capitalized chain restaurants.
D) gives mom and pop restaurants a competitive advantage over highly capitalized chain restaurants.

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In the long run, a representative firm in a monopolistically competitive industry will end up


A) having an elasticity of demand that will be less than it was in the short run.
B) having a larger number of competitors than it will in the short run.
C) producing a level of output at which marginal cost and price are equal.
D) earning a normal profit, but not an economic profit.

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Monopolistically competitive sellers realize economic profits in the long run because entry barriers are significant.

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The larger the number of firms in an industry and the less the extent of product differentiation, the greater will be the elasticity of the individual seller's demand curve.

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Monopolistically competitive firms will achieve the most efficient allocation of society's resources because there are no significant barriers to entry into the industry.

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Answer the question on the basis of the following demand and cost data for a specific firm. \quad \quad \quad \quad Demand Data \text { Demand Data } \quad \quad \quad  Cost Data \text { Cost Data } (1) (2) (3)  Total  Price  Price  Quanti  Outpu  Cost  ty  t 11.0$10.066$61009.998.8577629.008.0088648.007.0099677.106.101010726.005.001111795.154.15121286\begin{array}{|c|c|c|c|c|}\hline(1) &(2) &(3) &&\text { Total } \\\text { Price }&\text { Price }&\text { Quanti }&\text { Outpu }&\text { Cost } \\&&\text { ty }& \text { t }\\\hline 11.0 & \$ 10.0 & 6 & 6 & \$ 61 \\0 & 0 & & & \\\hline 9.99 & 8.85 & 7 & 7 & 62 \\\hline 9.00 & 8.00 & 8 & 8 & 64 \\\hline 8.00 & 7.00 & 9 & 9 & 67 \\\hline 7.10 & 6.10 & 10 & 10 & 72 \\\hline 6.00 & 5.00 & 11 & 11 & 79 \\\hline 5.15 & 4.15 & 12 & 12 & 86 \\\hline\end{array} If columns (1) and (3) of the demand data shown are this firm's demand schedule, the profit-maximizing price will be


A) $9.
B) $7.
C) $11.
D) $6.

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Which of the following is a characteristic of monopolistic competition?


A) standardized product
B) a relatively small number of firms
C) absence of nonprice competition
D) relatively easy entry

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The price elasticity of a monopolistically competitive firm's demand curve varies


A) inversely with the number of competitors and the degree of product differentiation.
B) directly with the number of competitors and the degree of product differentiation.
C) directly with the number of competitors but inversely with the degree of product differentiation.
D) inversely with the number of competitors but directly with the degree of product differentiation.

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Which statement concerning monopolistic competition is false?


A) Long-run equilibrium under monopolistic competition and pure competition both entail zero economic profits for firms.
B) Monopolistic competition is likely to result in a greater variety of product brands than pure competition.
C) The monopolistically competitive demand curve is more elastic than the demand curve facing a monopoly.
D) Long-run equilibrium in monopolistic competition does not entail any economic inefficiency because of easy entry and exit.

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Answer the question based on the demand and cost schedules for a monopolistically competitive firm given in the table below.  Price  Quntity  Dennded  Total  Cost  Output $201$101182202163293144364125405106426\begin{array} { | c | c | c | c | } \hline \text { Price } & \begin{array} { c } \text { Quntity } \\\text { Dennded }\end{array} & \begin{array} { c } \text { Total } \\\text { Cost }\end{array} & \text { Output } \\\hline \$ 20 & 1 & \$ 10 & 1 \\\hline 18 & 2 & 20 & 2 \\\hline 16 & 3 & 29 & 3 \\\hline 14 & 4 & 36 & 4 \\\hline 12 & 5 & 40 & 5 \\\hline 10 & 6 & 42 & 6 \\\hline\end{array} What output quantity will the monopolistically competitive firm produce to maximize profits?


A) 2
B) 3
C) 5
D) 6

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Which is not a common form of nonprice competition in monopolistic competition?


A) customer services such as liberal guarantee and repair policies
B) advertisements featuring brand names
C) cash rebates and discount coupons
D) annual design and model changes

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Product variety in monopolistic competition comes at the cost of


A) nonprice competition.
B) barriers to entry.
C) diminishing returns.
D) excess capacity.

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The highest possible value of the Herfindahl index is 1,000.

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The demand curve faced by a monopolistically competitive firm is more elastic than the monopolist's demand curve.

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Monopolistic competition provides the benefit of product variety but at the cost of productive inefficiency.

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