Question 1

Compared with a perfectly competitive firm facing the same costs, long-run equilibrium for a monopolistically competitive firm will result in

Accepted Answer

A)  a higher price and greater output.
B)  a lower price and less output.
C)  a higher price and less output.
D)  a lower price and greater output.

Question 2

Compared to perfect competition, a monopolistically competitive market will produce ________ output and charge a ________ price.

Accepted Answer

A)  more; higher
B)  more; lower
C)  less; higher
D)  less; lower

Question 3

Which will be true for a monopolistic competitor experiencing short-run losses?

Accepted Answer

A)  P > ATC
B)  P = ATC
C)  P 
D)  P < MC

Question 4

-Refer to the above figure. This firm is operating in the

Accepted Answer

A)  long run since economic profits are greater than zero.
B)  long run since economic profits are less than zero.
C)  short run since economic profits are greater than zero.
D)  short run since economic profits are less than zero.

Question 5

A search good is a product

Accepted Answer

A)  with qualities that consumers lack the expertise to assess without assistance.
B)  that emphasizes the features of its product.
C)  with characteristics that enable an individual to evaluate the product's quality in advance of a purchase.
D)  that an individual must consume before the quality can be established.

Question 6

-Refer to the above figure. Which of the following statements about panel D in the figure is TRUE?

Accepted Answer

A)  The figure represents a long-run equilibrium for a monopolistic competitor.
B)  The figure represents an industry long-run equilibrium for monopolistic competition.
C)  The figure is in error since it doesn't show the monopolistic competitor making profits in the long run.
D)  The figure is in error since it has marginal cost intersecting the ATC curve at a point other than the minimum of ATC.

Question 7

-Refer to the above figure. Economic profits for this firm are

Accepted Answer

A)  negative.
B)  zero.
C)  positive.
D)  undetermined without more information.

Question 8

In order to differentiate their product brands from those of competing firms, monopolistically competitive firms

Accepted Answer

A)  equate marginal cost to marginal revenue to determine the profit maximizing quantity.
B)  spread false rumors about their competitors.
C)  take their competitor's reactions to changes in their policies into account.
D)  advertise their product.

Question 9

-Refer to the above figure. Which panel represents a monopolistic competitor that is earning zero economic profits?

Accepted Answer

A)  Panel A.
B)  Panel B.
C)  Panel C.
D)  Panel D.

Question 10

-Use the above figure. The total revenue earned by the monopolistically competitive firm is

Accepted Answer

A)  $300.
B)  $285.
C)  $180.
D)  $255.

Question 11

For a monopolistically competitive market, the number of firms in the market implies that

Accepted Answer

A)  each firm faces a perfectly elastic demand.
B)  all firms will make losses.
C)  each firm acts independently of other firms.
D)  firms will collude to set monopoly price and output.

Question 12

A product that must be actually consumed before the quality of the product can be determined is a(n)

Accepted Answer

A)  search good.
B)  consumable good.
C)  consumption good.
D)  experience good.

Question 13

The monopolistically competitive firm's economic profits tend toward zero in the long run. Why is this so?

Accepted Answer

A)  Monopolistically competitive firm's are rarely able to maintain the corporate discipline necessary to sustain profits in the long run.
B)  If a monopolistically competitive firm is profitable for more than 2 years, the Justice Department orders a corporate restructuring to pull the company back to a normal rate of return.
C)  In the long run, other firms will successfully offer substitutes for the profitable firm's product, and competition will eliminate economic profits.
D)  Even though the monopolistically competitive firm can successfully maintain barriers to entry, keeping competition at bay becomes very expensive.

Question 14

Which of the following is NOT a feature of monopolistic competition?

Accepted Answer

A)  significant numbers of sellers in a highly competitive market
B)  differentiated products
C)  sales promotion and advertising
D)  inability of firms to enter or exit the market

Question 15

In a monopolistically competitive market, the consumer receives the benefit of

Accepted Answer

A)  production at minimum average cost.
B)  production where price equals marginal cost.
C)  product diversity.
D)  allocative efficiency.

Question 16

-Refer to the above figure. Which panel represents the long-run situation for a monopolistically competitive firm?

Accepted Answer

A)  Panel A.
B)  Panel B.
C)  Panel C.
D)  Panel D.

Question 17

The monopolistic competitive firm in short-run equilibrium may experience economic profits that are

Accepted Answer

A)  always zero.
B)  greater than, equal to, or less than zero.
C)  always positive.
D)  always negative.

Question 18

-Use the above figure. The profit-maximizing monopolistically competitive firm

Accepted Answer

A)  is losing $0.05 per unit of output.
B)  is earning $0.40 per unit of output.
C)  is earning $0.15 per unit of output.
D)  is earning $0.05 per unit of output.

Question 19

Explain the difference between informational advertising and persuasive advertising. Give an example of a product that would be the subject of each type of advertising and explain why that type of advertising fits the product.

Accepted Answer

Informational advertising explains the f...

Question 20

Which of the following statements is generally TRUE about information products?

Accepted Answer

A)  High fixed costs and low marginal costs
B)  High fixed costs and high marginal costs
C)  Low fixed costs and low marginal costs
D)  Low fixed costs and high marginal costs

Exam 25: Monopolistic Competition

Compared to perfect competition, a monopolistically competitive market will produce ________ output and charge a ________ price.

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-Use the above figure. The profit-maximizing monopolistically competitive firm

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Which of the following statements is generally TRUE about information products?

Correct AnswerverifiedShow Answer

-Refer to the above figure. Economic profits for this firm are

Correct AnswerverifiedShow Answer

In order to differentiate their product brands from those of competing firms, monopolistically competitive firms

Correct AnswerverifiedShow Answer

Which will be true for a monopolistic competitor experiencing short-run losses?

Correct AnswerverifiedShow Answer

Compared with a perfectly competitive firm facing the same costs, long-run equilibrium for a monopolistically competitive firm will result in

Correct AnswerverifiedShow Answer

-Refer to the above figure. Which panel represents the long-run situation for a monopolistically competitive firm?

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The monopolistically competitive firm's economic profits tend toward zero in the long run. Why is this so?

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-Refer to the above figure. Which of the following statements about panel D in the figure is TRUE?

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In a monopolistically competitive market, the consumer receives the benefit of

Correct AnswerverifiedShow Answer

Explain the difference between informational advertising and persuasive advertising. Give an example of a product that would be the subject of each type of advertising and explain why that type of advertising fits the product.

Correct AnswerverifiedInformational advertising explains the f...View AnswerShow Answer

-Refer to the above figure. This firm is operating in the

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-Refer to the above figure. Which panel represents a monopolistic competitor that is earning zero economic profits?

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A search good is a product

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The monopolistic competitive firm in short-run equilibrium may experience economic profits that are

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Which of the following is NOT a feature of monopolistic competition?

Correct AnswerverifiedShow Answer

For a monopolistically competitive market, the number of firms in the market implies that

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-Use the above figure. The total revenue earned by the monopolistically competitive firm is

Correct AnswerverifiedShow Answer

A product that must be actually consumed before the quality of the product can be determined is a(n)

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Compared to perfect competition, a monopolistically competitive market will produce output and charge a price.

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Informational advertising explains the f...
View Answer

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