Question 1

-Refer to Figure 10-12. The diagram depicts a firm

Accepted Answer

A)   in a constant cost industry.
B)   in an increasing cost industry.
C)   in long-run equilibrium.
D)   that is incurring short-run losses.E) None of the above
F) All of the above

Question 2

f units. What happens if it increases its output to Qg units? A)  Its average cost of production will fall and its profit will rise. B)  It will be taking advantage of economies of scale and will be able to lower the price of its product. C)  It will move from a zero profit situation to a profit situation D)  It will move from a zero profit situation to a loss situation" class="answers-bank-image d-inline" rel="preload" >
-Refer to Figure 10-17. Suppose the firm is currently producing Qf units. What happens if it increases its output to Qg units?

Accepted Answer

A)   Its average cost of production will fall and its profit will rise.
B)   It will be taking advantage of economies of scale and will be able to lower the price of its product.
C)   It will move from a zero profit situation to a profit situation
D)   It will move from a zero profit situation to a loss situationE) A) and B)
F) A) and C)

Question 3

-Refer to Table 10-2. What is the marginal profit from producing and selling the 5th case?

Accepted Answer

A)   $275
B)   $145
C)   $35
D)   $20E) A) and B)
F) A) and C)

Question 4

0adP3 B)  the area P1bcP2 C)  the area P0acP2 D)  the area P2cdP3" class="answers-bank-image d-inline" rel="preload" >
-Refer to Figure 10-4. What is the area that represents the loss made by the firm?

Accepted Answer

A)   the area P0adP3
B)   the area P1bcP2
C)   the area P0acP2
D)   the area P2cdP3E) A) and B)
F) B) and D)

Question 5

Being the first to sell a particular good can give a firm advantages over other firms that sell similar products. What is the name given to these advantages?

Accepted Answer

A)   first-mover
B)   first come, first served
C)   follow the leader
D)   first to marketE) A) and B)
F) A) and C)

Question 6

Discuss the role of product differentiation and advertising in monopolistic competition.

Accepted Answer

Firms acquire market power through produ...

Question 7

Which of the following characteristics is not common to monopolistic competition and perfect competition?

Accepted Answer

A)   Firms act to maximise profit.
B)   Entry barriers into the industry are low.
C)   The market demand curve is downward sloping.
D)   Firms take market prices as given.E) A) and B)
F) A) and C)

Question 8

In the long run, firms in both monopolistically competitive markets and perfectly competitive markets earn zero economic profits, but unlike perfectly competitive firms in the long run, monopolistically competitive firms

Accepted Answer

A)   charge a price that is greater than average revenue.
B)   charge a price that is equal to marginal cost.
C)   do not produce at minimum average total cost.
D)   charge a price that is equal to average total cost.E) C) and D)
F) A) and B)

Question 9

If a typical monopolistically competitive firm is incurring short-run losses, then

Accepted Answer

A)   other more competitive firms will enter the market.
B)   as some firms leave, the remaining firms will experience an increase in the demand for their products.
C)   as some firms leave, the demand for the products of the remaining firms will become more elastic.
D)   the industry will eventually cease to exist.E) A) and D)
F) B) and D)

Question 10

Long-run equilibrium under monopolistic competition is similar to long-run equilibrium under perfect competition in that

Accepted Answer

A)   firms produce at the minimum point of their average cost curves.
B)   price equals marginal cost.
C)   firms break even.
D)   price equals marginal revenue.E) C) and D)
F) B) and C)

Question 11

If a monopolistically competitive firm breaks even, the firm is earning as much in this industry as it could in any other comparable industry.

Accepted Answer

A) True 
 B)False

Question 12

One reason why the coffeehouse market is competitive is that

Accepted Answer

A)   demand for specialty coffee is very high.
B)   it is trendy and therefore is likely to have a customer following.
C)   barriers to entry are low.
D)   consumption takes place in public.E) B) and D)
F) None of the above

Question 13

Monopolistically competitive firms can differentiate their products

Accepted Answer

A)   by producing at minimum efficient scale.
B)   by producing where marginal revenue equals marginal cost.
C)   by equating price and average total cost.
D)   through marketing.E) A) and D)
F) B) and C)

Question 14

Which of the following is not a characteristic of monopolistic competition?

Accepted Answer

A)   Firms are price takers.
B)   There are many buyers and sellers.
C)   Barriers to entry are low.
D)   Firms sell similar, but not identical, products.E) B) and C)
F) B) and D)

Question 15

Which of the following statements is true about monopolistically competitive firms?

Accepted Answer

A)   Unlike perfectly competitive firms, monopolistically competitive firms are able to raise their prices without losing all of their customers.
B)   Like perfectly competitive firms, monopolistically competitive firms are not able to raise prices without losing all of their customers because they face competition from firms selling similar products.
C)   Like perfectly competitive firms, monopolistically competitive firms maximise their profits by settling price equal to marginal cost.
D)   Unlike perfectly competitive firms, monopolistically competitive firms face perfectly inelastic demand curves.E) A) and B)
F) A) and C)

Question 16

-Refer to Figure 10-8. What is the firm's profit-maximising price?

Accepted Answer

A)   $12
B)   $13
C)   $14
D)   $16E) C) and D)
F) B) and D)

Question 17

When a monopolistically competitive firm cuts its price to increase its sales, it experiences a gain in revenue due to the

Accepted Answer

A)   substitution effect.
B)   income effect.
C)   price effect.
D)   output effect.E) None of the above
F) B) and C)

Question 18

For productive efficiency to hold,

Accepted Answer

A)   price must equal the marginal cost of the last unit produced.
B)   price must equal marginal revenue of the last unit sold.
C)   average variable cost is minimised in production.
D)   average total cost is minimised in production.E) None of the above
F) B) and C)

Question 19

Both monopolistically competitive firms and perfectly competitive firms maximise profits

Accepted Answer

A)   by producing where price equals average total cost.
B)   by producing where marginal revenue equals average revenue.
C)   by producing where marginal revenue is equal to marginal cost.
D)   by producing where price equals average variable cost.E) A) and B)
F) A) and C)

Question 20

What is the trade-off that consumers face when buying the product of a monopolistically competitive firm?

Accepted Answer

A)   Consumers pay higher prices but receive better quality goods compared to the output of perfectly competitive firms.
B)   Consumers pay a price greater than marginal cost but have the luxury of choices more suited to their tastes.
C)   Consumers pay higher prices but the products are produced by highly efficient firms.
D)   Consumers pay lower prices but have fewer choices.E) B) and C)
F) None of the above

Exam 10: Monopolistic Competition : The Competitive Model in More Realistic Setting

Which of the following characteristics is not common to monopolistic competition and perfect competition?

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-Refer to Figure 10-4. What is the area that represents the loss made by the firm?

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When a monopolistically competitive firm cuts its price to increase its sales, it experiences a gain in revenue due to the

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Which of the following statements is true about monopolistically competitive firms?

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Which of the following is not a characteristic of monopolistic competition?

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In the long run, firms in both monopolistically competitive markets and perfectly competitive markets earn zero economic profits, but unlike perfectly competitive firms in the long run, monopolistically competitive firms

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-Refer to Table 10-2. What is the marginal profit from producing and selling the 5th case?

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-Refer to Figure 10-8. What is the firm's profit-maximising price?

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For productive efficiency to hold,

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Long-run equilibrium under monopolistic competition is similar to long-run equilibrium under perfect competition in that

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Both monopolistically competitive firms and perfectly competitive firms maximise profits

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Being the first to sell a particular good can give a firm advantages over other firms that sell similar products. What is the name given to these advantages?

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What is the trade-off that consumers face when buying the product of a monopolistically competitive firm?

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Monopolistically competitive firms can differentiate their products

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-Refer to Figure 10-17. Suppose the firm is currently producing Qf units. What happens if it increases its output to Qg units?

Correct AnswerverifiedShow Answer

Discuss the role of product differentiation and advertising in monopolistic competition.

Correct AnswerverifiedFirms acquire market power through produ...View AnswerShow Answer

One reason why the coffeehouse market is competitive is that

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If a typical monopolistically competitive firm is incurring short-run losses, then

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If a monopolistically competitive firm breaks even, the firm is earning as much in this industry as it could in any other comparable industry.

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-Refer to Figure 10-12. The diagram depicts a firm

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-Refer to Figure 10-17. Suppose the firm is currently producing Q_f units. What happens if it increases its output to Q_gunits?

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Firms acquire market power through produ...
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