Question 1

In the long run, what level of economic profits can a monopolistic competitor expect to receive?

Accepted Answer

A)   positive
B)   zero
C)   negative
D)   either negative or positive, depending on the demand for its product and its costs

Question 2

Average variable cost for an information product would

Accepted Answer

A)   first decrease and then increase as quantity increases.
B)   increase constantly as quantity increases.
C)   decrease constantly as quantity increases.
D)   remain constant as quantity increases.

Question 3

Why do firms in a monopolistically competitive industry advertise?

Accepted Answer

In a monopolistically competitive indust...

Question 4

In the above figure, this profit-maximizing monopolistic competitive firm will realize an economic profit of

Accepted Answer

A)   -$1,400.
B)   $2,100.
C)   $1,400.
D)   $700.

Question 5

A distinguishing characteristic of producers of information products is their

Accepted Answer

A)   high social cost.
B)   short-run economies of operation.
C)   low average fixed costs.
D)   low fixed costs.

Question 6

The products sold by monopolistically competitive firms

Accepted Answer

A)   are differentiated.
B)   are homogeneous.
C)   can be either homogeneous or differentiated.
D)   have no close substitutes.

Question 7

-In the above figure for a monopolistically competitive firm, the profit-maximizing output and price are respectively

Accepted Answer

A)   80 units and $11.
B)   50 units and $8.
C)   60 units and $9.
D)   60 units and $14.

Question 8

The long-run equilibrium of a monopolistic competitor differs from the long-run equilibrium of a perfect competitor in that

Accepted Answer

A)   the monopolistic competitor makes economic profits.
B)   the monopolistic competitor sets price equal to marginal cost.
C)   the monopolistic competitor produces at the minimum point of its average total cost curve.
D)   the monopolistic competitor charges a price that exceeds marginal cost.

Question 9

In the short run, the monopolistic competitor is just like the perfect competitor in that

Accepted Answer

A)   equilibrium is determined by setting price equal to marginal cost.
B)   either type of firm can earn economic profits, experience economic losses, or break even in the short run.
C)   each equates marginal revenue and marginal cost in order to maximize profits, with the result that price exceeds marginal revenue.
D)   new firms enter in the short run when firms are making profits.

Question 10

John has just tried on the most comfortable pair of pants that he has ever known. The pants are a(n)

Accepted Answer

A)   experience good.
B)   credence good.
C)   logo good.
D)   information good.

Question 11

What is the most important characteristic of monopolistic competition? How do firms behave differently from perfect competitors?

Accepted Answer

Product differentiation is the most impo...

Question 12

-In the above figure, total revenue for this profit-maximizing monopolistically competitive firm is

Accepted Answer

A)   $50,000.
B)   $91,000.
C)   $96,000.
D)   $100,000.

Question 13

-In the above figure for a monopolistically competitive firm, the total cost at the profit-maximizing point is

Accepted Answer

A)   $480.
B)   $400.
C)   $540.
D)   $880.

Question 14

Which of the following is NOT a feature of a monopolistically competitive market?

Accepted Answer

A)   numerous buyers and sellers
B)   differentiated products
C)   advertising
D)   perfectly elastic demand curve

Question 15

One way to view the cost structure of monopolistic competition is to say that the cost of product differentiation is equal to

Accepted Answer

A)   the difference between marginal revenue and marginal cost.
B)   the difference between the cost of production for a monopolistically competitive firm in an open market and the minimum average total cost.
C)   the sum of price and marginal cost.
D)   the sum of marginal cost and minimum average cost.

Question 16

Which of the following is most likely to be a monopolistically competitive firm?

Accepted Answer

A)   smartphone manufacturer
B)   cellphone service provider
C)   college textbook publisher
D)   computer software maker

Question 17

In a monopolistically competitive market, entry into the industry

Accepted Answer

A)   is relatively easy.
B)   is blocked.
C)   is difficult due to extensive government regulation.
D)   is as difficult as entry into a monopoly.

Question 18

An information product is a product for which

Accepted Answer

A)   the first item is produced inexpensively but additional units are more costly to produce.
B)   the first unit is very costly to make but additional units are less costly to produce.
C)   the marginal cost first falls and then rises but the average total cost rises throughout its range.
D)   the average fixed cost first falls and then rises, but the average total cost falls throughout its range.

Question 19

In which industry structure is advertising and sales promotion likely to be most important?

Accepted Answer

A)   perfect competition
B)   monopoly
C)   monopolistic competition
D)   All of the above are equally reliant on effective advertising and promotion.

Question 20

A market situation in which a large number of firms produce similar but not identical products is called

Accepted Answer

A)   pure monopoly.
B)   monopolistically competitive.
C)   oligopolistic behavior.
D)   perfectly competitive.

Exam 25: Monopolistic Competition

One way to view the cost structure of monopolistic competition is to say that the cost of product differentiation is equal to

Correct AnswerverifiedShow Answer

John has just tried on the most comfortable pair of pants that he has ever known. The pants are a(n)

Correct AnswerverifiedShow Answer

Which of the following is most likely to be a monopolistically competitive firm?

Correct AnswerverifiedShow Answer

A market situation in which a large number of firms produce similar but not identical products is called

Correct AnswerverifiedShow Answer

What is the most important characteristic of monopolistic competition? How do firms behave differently from perfect competitors?

Correct AnswerverifiedProduct differentiation is the most impo...View AnswerShow Answer

The products sold by monopolistically competitive firms

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Why do firms in a monopolistically competitive industry advertise?

Correct AnswerverifiedIn a monopolistically competitive indust...View AnswerShow Answer

An information product is a product for which

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-In the above figure, total revenue for this profit-maximizing monopolistically competitive firm is

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In a monopolistically competitive market, entry into the industry

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The long-run equilibrium of a monopolistic competitor differs from the long-run equilibrium of a perfect competitor in that

Correct AnswerverifiedShow Answer

In the above figure, this profit-maximizing monopolistic competitive firm will realize an economic profit of

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Which of the following is NOT a feature of a monopolistically competitive market?

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A distinguishing characteristic of producers of information products is their

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-In the above figure for a monopolistically competitive firm, the profit-maximizing output and price are respectively

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Average variable cost for an information product would

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-In the above figure for a monopolistically competitive firm, the total cost at the profit-maximizing point is

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In the short run, the monopolistic competitor is just like the perfect competitor in that

Correct AnswerverifiedShow Answer

In the long run, what level of economic profits can a monopolistic competitor expect to receive?

Correct AnswerverifiedShow Answer

In which industry structure is advertising and sales promotion likely to be most important?

Correct AnswerverifiedShow Answer

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Product differentiation is the most impo...
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In a monopolistically competitive indust...
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