Exam 16: Monopolistic Competition

A) Firms in monopolistic competition and monopoly can earn economic profits in the short run.
B) Firms in monopolistic competition and perfect competition produce the welfare-maximizing level of output.
C) Monopolistically competitive firms price above marginal cost, whereas competitive firms price at marginal cost.
D) Firms wishing to enter a monopolistically competitive market can do so freely, whereas firms wishing to enter a monopoly market will face barriers.

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A) with its minimum at the point (Q = 24, P = $36) .
B) with its minimum at the point (Q = 24, P = $24) .
C) tangent to the demand curve at the point (Q = 24, P = $36) .
D) tangent to the demand curve at the point (Q = 32, P = $32) .

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A) size.
B) quality.
C) newness.
D) cost of production.

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A) Firms in monopolistic competition and monopoly can earn economic profits in both the short run and the long run.
B) Both perfectly competitive and monopolistically competitive firms are price takers.
C) Both a monopolistically competitive industry and a monopoly are characterized by a very small number of (or one) firm(s) .
D) Firms can easily enter a perfectly competitive or monopolistically competitive industry.

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A) firms in the industry are typically characterized by very diverse product lines.
B) firms in the industry have some degree of market power.
C) products typically sell at a price equal to their marginal cost of production.
D) the actions of one seller have no impact on the profitability of other sellers.

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A) positive; the more differentiated the product, the more a firm is likely to spend on advertising.
B) negative; the more differentiated the product, the less a firm is likely to spend on advertising.
C) zero; there is no relationship between product differentiation and advertising.
D) irrelevant; firms with differentiated products do not need to advertise.

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A) both positive and negative externalities.
B) only positive externalities.
C) only negative externalities.
D) only private profit opportunities (no externalities) .

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A) measures the percentage of total output supplied by the four largest firms in the industry.
B) reflects the level of competition in an industry.
C) is related to the control that each firm has over price.
D) All of the above are correct.

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A) losses in the short run and profits in the long run.
B) profits in the short run and the long run.
C) losses in the short run and zero profit in the long run.
D) zero profit in the short run and losses in the long run.

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A) creates desires that otherwise might not exist.
B) enhances competition.
C) benefits television viewers who enjoy TV commercials.
D) All of the above are correct.

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A) efficient market structure because long-run profits are zero.
B) efficient market structure because each firm produces at its efficient scale.
C) inefficient market structure because there is deadweight loss.
D) Both a and b are correct.

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A) both Adibok and Wurkout have incentives to spend large amounts of money on advertising for their athletic shoes.
B) Adibok has an incentive to spend a large amount of money on advertising for its athletic shoes, but Wurkout does not.
C) Wurkout has an incentive to spend a large amount of money on advertising for its athletic shoes, but Adibok does not.
D) neither Adibok nor Wurkout has an incentive to spend a large amount of money on advertising for their athletic shoes.

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A) monopolistically competitive firms earn a higher profit than perfectly competitive firms because monopolistically competitive firms have some monopoly power.
B) monopolistically competitive firms produce a higher output than perfectly competitive firms because competition drives the perfectly competitive firms' output down.
C) both monopolistically competitive and perfectly competitive firms produce where P = MC.
D) both monopolistically competitive and perfectly competitive firms produce where P = ATC.

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A) Advertising manipulates people's tastes.
B) Advertising impedes competition.
C) Advertising promotes economies of scale.
D) Advertising increases the perception of product differentiation.

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A) 100 and the long-run equilibrium price is $90.
B) 100 and the long-run equilibrium price is $140.
C) 133.33 and the long-run equilibrium price is $56.67.
D) 133.33 and the long-run equilibrium price is $123.33.

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