Question 1

The monopolistically competitive seller maximizes profit by producing at the point where

Accepted Answer

A)   total revenue is at a maximum.
B)   average costs are at a minimum.
C)   marginal revenue equals marginal cost.
D)   price equals marginal revenue.

Question 2

In monopolistic competition, easy industry entry and exit drives long-run profits of firms to zero.

Accepted Answer

A) True 
 B)False

Question 3

The excess capacity problem associated with monopolistic competition implies that fewer firms could produce the same industry output at a lower total cost.

Accepted Answer

A) True 
 B)False

Question 4

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

Accepted Answer

A)   the use of trademarks and brand names
B)   recognized mutual interdependence
C)   product differentiation
D)   a relatively large number of sellers

Question 5

The larger the number of firms and the smaller the degree of product differentiation, the

Accepted Answer

A)   greater the divergence between the demand and the marginal revenue curves of the monopolistically competitive firm.
B)   larger will be the monopolistically competitive firm's fixed costs.
C)   less elastic is the monopolistically competitive firm's demand curve.
D)   more elastic is the monopolistically competitive firm's demand curve.

Question 6

The four-firm concentration ratio cannot have a value above 1.0.

Accepted Answer

A) True 
 B)False

Question 7

The graph depicts a monopolistically competitive firm.  In the short run, this monopolistically competitive firm will set the price at

Accepted Answer

A)   $55 and produce 45 units of output.
B)   $65 and produce 35 units of output.
C)   $50 and produce 35 units of output.
D)   $52 and produce 50 units of output.

Question 8

Which is true of pure competition but not of monopolistic competition?

Accepted Answer

A)   There are no significant barriers to entry.
B)   Long-run economic profits are zero.
C)   There are a large number of firms in the market.
D)   Long-run equilibrium occurs at the minimum point on the ATC curve.

Question 9

Dequam likes product variety, while Natasha is most concerned about paying the lowest price possible for a good. This suggests that

Accepted Answer

A)   Dequam cares more about allocative efficiency, while Natasha cares more about productive efficiency.
B)   Dequam cares more about productive efficiency, while Natasha cares more about allocative efficiency.
C)   Dequam prefers monopolistically competitive industries, while Natasha prefers purely competitive industries.
D)   Dequam prefers purely competitive industries, while Natasha prefers monopolistically competitive industries.

Question 10

The stronger the product differentiation in monopolistic competition, the

Accepted Answer

A)   less elastic the demand curve, and production will take place further to the left of minimum average costs.
B)   less elastic the demand curve, and production will take place further to the right of minimum average costs.
C)   more elastic the demand curve, and production will take place further to the left of minimum average costs.
D)   more elastic the demand curve, and production will take place further to the right of minimum average costs.

Question 11

In the long-run equilibrium of a monopolistically competitive industry,

Accepted Answer

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

Question 12

In which of these continuums of degrees of competition (highest to lowest)  is monopolistic competition properly placed?

Accepted Answer

A)   pure competition, oligopoly, pure monopoly, monopolistic competition
B)   oligopoly, pure competition, monopolistic competition, pure monopoly
C)   monopolistic competition, pure competition, pure monopoly, oligopoly
D)   pure competition, monopolistic competition, oligopoly, pure monopoly

Question 13

The restaurant, legal assistance, and clothing industries are each illustrations of

Accepted Answer

A)   countervailing power.
B)   homogeneous oligopoly.
C)   monopolistic competition.
D)   pure monopoly.

Question 14

The amount of excess capacity in pure competition tends to become larger the more elastic the individual firmâ€™s demand curve becomes.

Accepted Answer

A) True 
 B)False

Exam 13: Monopolistic Competition

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

Correct Answer
verified

Dequam likes product variety, while Natasha is most concerned about paying the lowest price possible for a good. This suggests that

Correct Answer
verified

The four-firm concentration ratio cannot have a value above 1.0.

Correct Answer
verified

The larger the number of firms and the smaller the degree of product differentiation, the

Correct Answer
verified

The restaurant, legal assistance, and clothing industries are each illustrations of

Correct Answer
verified

The stronger the product differentiation in monopolistic competition, the

Correct Answer
verified

In monopolistic competition, easy industry entry and exit drives long-run profits of firms to zero.

Correct Answer
verified

In which of these continuums of degrees of competition (highest to lowest) is monopolistic competition properly placed?

Correct Answer
verified

The excess capacity problem associated with monopolistic competition implies that fewer firms could produce the same industry output at a lower total cost.

Correct Answer
verified

Which is true of pure competition but not of monopolistic competition?

Correct Answer
verified

In the long-run equilibrium of a monopolistically competitive industry,

Correct Answer
verified

The monopolistically competitive seller maximizes profit by producing at the point where

Correct Answer
verified

The graph depicts a monopolistically competitive firm. In the short run, this monopolistically competitive firm will set the price at

Correct Answer
verified

The amount of excess capacity in pure competition tends to become larger the more elastic the individual firmâ€™s demand curve becomes.

Correct Answer
verified

Exam 13: Monopolistic Competition

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

Correct AnswerverifiedShow Answer

Dequam likes product variety, while Natasha is most concerned about paying the lowest price possible for a good. This suggests that

Correct AnswerverifiedShow Answer

The four-firm concentration ratio cannot have a value above 1.0.

Correct AnswerverifiedShow Answer

The larger the number of firms and the smaller the degree of product differentiation, the

Correct AnswerverifiedShow Answer

The restaurant, legal assistance, and clothing industries are each illustrations of

Correct AnswerverifiedShow Answer

The stronger the product differentiation in monopolistic competition, the

Correct AnswerverifiedShow Answer

In monopolistic competition, easy industry entry and exit drives long-run profits of firms to zero.

Correct AnswerverifiedShow Answer

In which of these continuums of degrees of competition (highest to lowest) is monopolistic competition properly placed?

Correct AnswerverifiedShow Answer

The excess capacity problem associated with monopolistic competition implies that fewer firms could produce the same industry output at a lower total cost.

Correct AnswerverifiedShow Answer

Which is true of pure competition but not of monopolistic competition?

Correct AnswerverifiedShow Answer

In the long-run equilibrium of a monopolistically competitive industry,

Correct AnswerverifiedShow Answer

The monopolistically competitive seller maximizes profit by producing at the point where

Correct AnswerverifiedShow Answer

The graph depicts a monopolistically competitive firm. In the short run, this monopolistically competitive firm will set the price at

Correct AnswerverifiedShow Answer

The amount of excess capacity in pure competition tends to become larger the more elastic the individual firmâ€™s demand curve becomes.

Correct AnswerverifiedShow Answer

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