Question 1

Monopolistic competition means

Accepted Answer

A)   a market situation where competition is based entirely on product differentiation and advertising.
B)   a large number of firms producing a standardized or homogeneous product.
C)   many firms producing differentiated products.
D)   a few firms producing a standardized or homogeneous product.E) A) and B)
F) A) and C)

Question 2

At long-run equilibrium in monopolistic competition, there is

Accepted Answer

A)   allocative efficiency but not productive efficiency.
B)   productive efficiency but not allocative efficiency.
C)   both allocative and productive efficiency.
D)   neither allocative nor productive efficiency.E) A) and C)
F) A) and B)

Question 3

Which of the following is correct for a monopolistically competitive firm in long-run equilibrium?

Accepted Answer

A)   MC = ATC.
B)   MC exceeds MR.
C)   P exceeds minimum ATC.
D)   P = MC.E) A) and C)
F) None of the above

Question 4

The four-firm sales concentration ratio for an industry measures the

Accepted Answer

A)   geographic concentration of firms.
B)   extent to which the four largest firms dominate the production of a good.
C)   percentage of the industry's capital facilities owned by the four largest firms.
D)   degree of X-inefficiency in the industry.E) None of the above
F) A) and B)

Question 5

A significant difference between a monopolistically competitive firm and a purely competitive firm is that the

Accepted Answer

A)   former does not seek to maximize profits.
B)   latter recognizes that price must be reduced to sell more output.
C)   former sells similar, although not identical, products.
D)   former's demand curve is perfectly inelastic.E) B) and C)
F) None of the above

Question 6

Answer the question on the basis of the following demand and cost data for a specific firm.   \quad \quad \quad \quad Demand Data 	ext { Demand Data } Demand Data     \quad \quad \quad    Cost Data 	ext { Cost Data } Cost Data  
 (1) (2) (3)  Total  Price  Price  Quanti  Outpu  Cost  ty  t 11.0$10.066$619.998.8577629.008.0088648.007.0099677.106.101010726.005.001111795.154.15121286\begin{array}{|c|c|c|c|c|}\hline(1)  &(2) &(3) &&	ext { Total }  \	ext { Price }&	ext { Price }&	ext { Quanti }&	ext { Outpu }&	ext { Cost } \&&	ext { ty }& 	ext { t }\\hline 11.0 & \$ 10.0 & 6 & 6 & \$ 61 \\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}(1)  Price 11.09.999.008.007.106.005.15​(2)  Price $10.08.858.007.006.105.004.15​(3)  Quanti  ty 6789101112​ Outpu  t 6789101112​ Total  Cost $61626467727986​​  Suppose that entry into the industry changes this firm's demand schedule from columns (1)  and (3)  to columns (2)  and (3) . Economic profit will

Accepted Answer

A)   fall by $10.
B)   fall to $6.
C)   increase by $10.
D)   decline to zero. E) A) and B)
F) C) and D)

Question 7

In monopolistically competitive markets, resources are

Accepted Answer

A)   overallocated because long-run equilibrium occurs where price exceeds marginal cost.
B)   underallocated because long-run equilibrium occurs where price exceeds marginal cost.
C)   overallocated because long-run equilibrium occurs where marginal cost exceeds price.
D)   underallocated because long-run equilibrium occurs where marginal cost exceeds price.E) B) and C)
F) All of the above

Question 8

If an industry evolves from oligopoly to monopolistic competition, we would expect

Accepted Answer

A)   the four-firm concentration ratio to increase.
B)   the four-firm concentration ratio to decrease.
C)   the four-firm concentration ratio to remain the same.
D)   barriers to entry to strengthen.E) B) and C)
F) A) and C)

Question 9

The market situation of a monopolistic competitor is made more complex than our simple revenue-and-costs graphs would suggest, because the firm in reality juggles three decisions:

Accepted Answer

A)   price, output quantity, and revenues.
B)   revenue, costs, and profits.
C)   advertising, resources, and product.
D)   price, product, and advertising.E) B) and D)
F) B) and C)

Question 10

A monopolistically competitive firm is producing at a short-run output level where average total cost is $10.00, marginal cost is $5.00, marginal revenue is $6.00, and price is $12.00. In the short run, the firm should

Accepted Answer

A)   decrease the level of output.
B)   increase the level of output.
C)   make no change in the level of output.
D)   increase product price.E) A) and B)
F) A) and C)

Question 11

The economic profits earned by monopolistically competitive sellers are zero in the long run.

Accepted Answer

A) True 
 B)False

Question 12

The entry of more firms into a monopolistically competitive market tends to increase the excess capacity of firms in the industry in the long run.

Accepted Answer

A) True 
 B)False

Question 13

A monopolistically competitive industry combines elements of both competition and monopoly. The competition element results from

Accepted Answer

A)   the likelihood of collusion.
B)   product differentiation.
C)   low entry barriers.
D)   mutual interdependence in decision making.E) None of the above
F) B) and C)

Question 14

In the long run, a typical firm in a monopolistically competitive market earns positive economic profits.

Accepted Answer

A) True 
 B)False

Question 15

Keely says that heâ€™s glad that his morning coffee is sold in a monopolistically competitive market rather than a purely competitive market. If this is true for most things Keely buys, it suggests that he

Accepted Answer

A)   is most concerned about paying the lowest price possible.
B)   cares most about allocative efficiency.
C)   is willing to pay extra for product variety.
D)   is a creature of habit who always buys the same type of a particular good.E) A) and C)
F) A) and D)

Question 16

Assume the top six firms comprising an industry have market shares of 10, 8, 8, 5, 5, and 4 percent. The remaining 20 firms each have market shares of 2 percent. The Herfindahl index for this industry is

Accepted Answer

A)   294.
B)   31.
C)   374.
D)   253.E) A) and C)
F) None of the above

Question 17

Product differentiation is what allows monopolistically competitive firms to have some market power.

Accepted Answer

A) True 
 B)False

Question 18

A monopolistically competitive firm is producing at an output level in the short run where average total cost is $4.50, price is $4.00, marginal revenue is $2.50, and marginal cost is $2.50. This firm is operating

Accepted Answer

A)   with positive profits.
B)   with a loss.
C)   at the break-even point.
D)   at a nonoptimal level of output.E) All of the above
F) A) and B)

Question 19

The variety of products and features that consumers may choose from in monopolistically competitive industries

Accepted Answer

A)   at least partially offsets the economic inefficiencies of this market structure.
B)   leads to an optimal allocation of resources in the market structure.
C)   guarantees that firms produce at full-capacity output levels.
D)   makes the demand curves facing firms in these industries perfectly elastic.E) A) and C)
F) All of the above

Question 20

The less elastic a monopolistic competitor's long-run demand curve, the

Accepted Answer

A)   less its excess capacity.
B)   higher its price relative to that of a pure competitor having the same cost curves.
C)   higher its long-run profits.
D)   lower its average total cost at its equilibrium level of output.E) B) and D)
F) All of the above

Exam 13: Monopolistic Competition

A monopolistically competitive firm is producing at an output level in the short run where average total cost is $4.50, price is $4.00, marginal revenue is $2.50, and marginal cost is $2.50. This firm is operating

Correct Answer
verified

The economic profits earned by monopolistically competitive sellers are zero in the long run.

Correct Answer
verified

In the long run, a typical firm in a monopolistically competitive market earns positive economic profits.

Correct Answer
verified

Product differentiation is what allows monopolistically competitive firms to have some market power.

Correct Answer
verified

The variety of products and features that consumers may choose from in monopolistically competitive industries

Correct Answer
verified

Assume the top six firms comprising an industry have market shares of 10, 8, 8, 5, 5, and 4 percent. The remaining 20 firms each have market shares of 2 percent. The Herfindahl index for this industry is

Correct Answer
verified

In monopolistically competitive markets, resources are

Correct Answer
verified

If an industry evolves from oligopoly to monopolistic competition, we would expect

Correct Answer
verified

Which of the following is correct for a monopolistically competitive firm in long-run equilibrium?

Correct Answer
verified

The market situation of a monopolistic competitor is made more complex than our simple revenue-and-costs graphs would suggest, because the firm in reality juggles three decisions:

Correct Answer
verified

A monopolistically competitive firm is producing at a short-run output level where average total cost is $10.00, marginal cost is $5.00, marginal revenue is $6.00, and price is $12.00. In the short run, the firm should

Correct Answer
verified

The less elastic a monopolistic competitor's long-run demand curve, the

Correct Answer
verified

A monopolistically competitive industry combines elements of both competition and monopoly. The competition element results from

Correct Answer
verified

The four-firm sales concentration ratio for an industry measures the

Correct Answer
verified

At long-run equilibrium in monopolistic competition, there is

Correct Answer
verified

Keely says that heâ€™s glad that his morning coffee is sold in a monopolistically competitive market rather than a purely competitive market. If this is true for most things Keely buys, it suggests that he

Correct Answer
verified

Monopolistic competition means

Correct Answer
verified

Correct Answer
verified

The entry of more firms into a monopolistically competitive market tends to increase the excess capacity of firms in the industry in the long run.

Correct Answer
verified

A significant difference between a monopolistically competitive firm and a purely competitive firm is that the

Correct Answer
verified

Exam 13: Monopolistic Competition

A monopolistically competitive firm is producing at an output level in the short run where average total cost is $4.50, price is $4.00, marginal revenue is $2.50, and marginal cost is $2.50. This firm is operating

Correct AnswerverifiedShow Answer

The economic profits earned by monopolistically competitive sellers are zero in the long run.

Correct AnswerverifiedShow Answer

In the long run, a typical firm in a monopolistically competitive market earns positive economic profits.

Correct AnswerverifiedShow Answer

Product differentiation is what allows monopolistically competitive firms to have some market power.

Correct AnswerverifiedShow Answer

The variety of products and features that consumers may choose from in monopolistically competitive industries

Correct AnswerverifiedShow Answer

Assume the top six firms comprising an industry have market shares of 10, 8, 8, 5, 5, and 4 percent. The remaining 20 firms each have market shares of 2 percent. The Herfindahl index for this industry is

Correct AnswerverifiedShow Answer

In monopolistically competitive markets, resources are

Correct AnswerverifiedShow Answer

If an industry evolves from oligopoly to monopolistic competition, we would expect

Correct AnswerverifiedShow Answer

Which of the following is correct for a monopolistically competitive firm in long-run equilibrium?

Correct AnswerverifiedShow Answer

The market situation of a monopolistic competitor is made more complex than our simple revenue-and-costs graphs would suggest, because the firm in reality juggles three decisions:

Correct AnswerverifiedShow Answer

A monopolistically competitive firm is producing at a short-run output level where average total cost is $10.00, marginal cost is $5.00, marginal revenue is $6.00, and price is $12.00. In the short run, the firm should

Correct AnswerverifiedShow Answer

The less elastic a monopolistic competitor's long-run demand curve, the

Correct AnswerverifiedShow Answer

A monopolistically competitive industry combines elements of both competition and monopoly. The competition element results from

Correct AnswerverifiedShow Answer

The four-firm sales concentration ratio for an industry measures the

Correct AnswerverifiedShow Answer

At long-run equilibrium in monopolistic competition, there is

Correct AnswerverifiedShow Answer

Keely says that heâ€™s glad that his morning coffee is sold in a monopolistically competitive market rather than a purely competitive market. If this is true for most things Keely buys, it suggests that he

Correct AnswerverifiedShow Answer

Monopolistic competition means

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

The entry of more firms into a monopolistically competitive market tends to increase the excess capacity of firms in the industry in the long run.

Correct AnswerverifiedShow Answer

A significant difference between a monopolistically competitive firm and a purely competitive firm is that the

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

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified