Question 1

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

Accepted Answer

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.

Question 2

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

Accepted Answer

A) True 
 B)False

Question 3

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

Accepted Answer

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.

Question 4

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

Accepted Answer

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

Question 5

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 	ext { Price } & \begin{array} { c } 	ext { Quntity } \	ext { Dennded }\end{array} & \begin{array} { c } 	ext { Total } \	ext { Cost }\end{array} & 	ext { 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} Price $201816141210​ Quntity  Dennded ​123456​ Total  Cost ​$102029364042​ Output 123456​​  What output quantity will the monopolistically competitive firm produce to maximize profits?

Accepted Answer

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

Question 6

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

Accepted Answer

A) True 
 B)False

Question 7

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

Accepted Answer

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.

Question 8

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

Accepted Answer

A) True 
 B)False

Question 9

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

Accepted Answer

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.

Question 10

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

Accepted Answer

A) True 
 B)False

Question 11

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.

Accepted Answer

A) True 
 B)False

Question 12

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

Accepted Answer

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

Question 13

Which of the following is a characteristic of monopolistic competition?

Accepted Answer

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

Question 14

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

Accepted Answer

A) True 
 B)False

Question 15

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

Accepted Answer

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.

Question 16

Which statement concerning monopolistic competition is false?

Accepted Answer

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.

Question 17

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$61009.998.8577629.008.0088648.007.0099677.106.101010726.005.001111795.154.15121286\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 \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}(1)  Price 11.009.999.008.007.106.005.15​(2)  Price $10.008.858.007.006.105.004.15​(3)  Quanti  ty 6789101112​ Outpu  t 6789101112​ Total  Cost $61626467727986​​  With the demand schedule shown by columns (2)  and (3) , in long-run equilibrium

Accepted Answer

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.

Question 18

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

Accepted Answer

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.

Question 19

Product variety in monopolistic competition comes at the cost of

Accepted Answer

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

Question 20

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$61009.998.8577629.008.0088648.007.0099677.106.101010726.005.001111795.154.15121286\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 \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}(1)  Price 11.009.999.008.007.106.005.15​(2)  Price $10.008.858.007.006.105.004.15​(3)  Quanti  ty 6789101112​ Outpu  t 6789101112​ Total  Cost $61626467727986​​  If columns (1)  and (3)  of the demand data shown are this firm's demand schedule, the profit-maximizing price will be

Accepted Answer

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

Exam 13: Monopolistic Competition

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

Correct Answer
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Which of the following is a characteristic of monopolistic competition?

Correct Answer
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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.

Correct Answer
verified

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

Correct Answer
verified

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

Correct Answer
verified

Product variety in monopolistic competition comes at the cost of

Correct Answer
verified

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

Correct Answer
verified

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

Correct Answer
verified

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

Correct Answer
verified

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

Correct Answer
verified

Which statement concerning monopolistic competition is false?

Correct Answer
verified

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

Correct Answer
verified

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

Correct Answer
verified

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

Correct Answer
verified

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

Correct Answer
verified

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

Correct Answer
verified

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.

Correct Answer
verified

Exam 13: Monopolistic Competition

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Which of the following is a characteristic of monopolistic competition?

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Product variety in monopolistic competition comes at the cost of

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Which statement concerning monopolistic competition is false?

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

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.

Correct AnswerverifiedShow Answer

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