Question 1

If you sum the squares of the market shares of each firm in an industry (as measured by percent of industry sales) , you are calculating the

Accepted Answer

A)  four-firm concentration ratio.
B)  Herfindahl index.
C)  degree of collusion.
D)  Lerner index.

Question 2

(Consider This)  The main point of the 1987 Wendyâ€™s commercial depicting a Soviet fashion show was to

Accepted Answer

A)  show Wendyâ€™s product differentiation from its competitors.
B)  grow its international customer base.
C)  emphasize the efficiency of its production model.
D)  highlight the dependability of its reliable and consistent standardized product.

Question 3

In long-run equilibrium, a monopolistically competitive producer achieves

Accepted Answer

A)  neither productive efficiency nor allocative efficiency.
B)  both productive efficiency and allocative efficiency.
C)  productive efficiency but not allocative efficiency.
D)  allocative efficiency but not productive efficiency.

Question 4

Excess capacity implies

Accepted Answer

A)  productive inefficiency.
B)  allocative inefficiency.
C)  productive efficiency.
D)  allocative efficiency.

Question 5

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 6

In the long run, monopolistically competitive firms make normal profits because they are forced to operate at the minimum point on their average total cost curve.

Accepted Answer

A) True 
 B)False

Question 7

The Herfindahl index is a measure of the degree of product differentiation in an industry.

Accepted Answer

A) True 
 B)False

Question 8

An important similarity between a monopolistically competitive firm and a purely competitive firm is that

Accepted Answer

A)  both face perfectly elastic demand schedules.
B)  economic profit tends toward zero for both.
C)  both realize productive efficiency.
D)  both realize allocative efficiency.

Question 9

Monopolistic competition means

Accepted Answer

A)  a market situation where competition is based entirely on product differentiation and advertising.
B)  a large number of firms producing a standardized or homogeneous product.
C)  many firms producing differentiated products.
D)  a few firms producing a standardized or homogeneous product.

Question 10

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 11

Product differentiation in monopolistic competition involves a trade-off between

Accepted Answer

A)  productive efficiency and allocative efficiency.
B)  monopoly power and ease of entry.
C)  consumer choice and productive efficiency.
D)  short-run profits and long-run efficiency.

Question 12

The demand curve of a monopolistically competitive firm is more elastic than that of a pure monopolist.

Accepted Answer

A) True 
 B)False

Question 13

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 14

The monopolistic competition model assumes that

Accepted Answer

A)  allocative efficiency will be achieved.
B)  productive efficiency will be achieved.
C)  firms will engage in nonprice competition.
D)  firms will realize economic profits in the long run.

Question 15

A monopolistically competitive firm is producing at a short-run output level where average total cost is $10.00, marginal cost is $5.00, marginal revenue is $6.00, and price is $12.00.In the short run, the firm should

Accepted Answer

A)  decrease the level of output.
B)  increase the level of output.
C)  make no change in the level of output.
D)  increase product price.

Question 16

As new firms enter a monopolistically competitive market, the demand curves facing existing firms will tend to shift left.

Accepted Answer

A) True 
 B)False

Question 17

Two industries that have the same four-firm concentration ratio can have significantly different Herfindahl indexes.

Accepted Answer

A) True 
 B)False

Question 18

Long-run equilibrium for a monopolistically competitive firm where economic profits are zero results from

Accepted Answer

A)  rising marginal costs.
B)  a perfectly elastic product demand curve.
C)  relatively easy entry.
D)  product differentiation and development.

Question 19

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 20

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.

Exam 13: Monopolistic Competition

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

Correct AnswerverifiedShow Answer

An important similarity between a monopolistically competitive firm and a purely competitive firm is that

Correct AnswerverifiedShow Answer

Long-run equilibrium for a monopolistically competitive firm where economic profits are zero results from

Correct AnswerverifiedShow Answer

In the long run, monopolistically competitive firms make normal profits because they are forced to operate at the minimum point on their average total cost curve.

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

If you sum the squares of the market shares of each firm in an industry (as measured by percent of industry sales) , you are calculating the

Correct AnswerverifiedShow Answer

The demand curve of a monopolistically competitive firm is more elastic than that of a pure monopolist.

Correct AnswerverifiedShow Answer

The Herfindahl index is a measure of the degree of product differentiation in an industry.

Correct AnswerverifiedShow Answer

Product variety in monopolistic competition comes at the cost of

Correct AnswerverifiedShow Answer

A monopolistically competitive firm is producing at a short-run output level where average total cost is $10.00, marginal cost is $5.00, marginal revenue is $6.00, and price is $12.00.In the short run, the firm should

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

Excess capacity implies

Correct AnswerverifiedShow Answer

In long-run equilibrium, a monopolistically competitive producer achieves

Correct AnswerverifiedShow Answer

As new firms enter a monopolistically competitive market, the demand curves facing existing firms will tend to shift left.

Correct AnswerverifiedShow Answer

The monopolistic competition model assumes that

Correct AnswerverifiedShow Answer

Monopolistic competition means

Correct AnswerverifiedShow Answer

(Consider This) The main point of the 1987 Wendyâ€™s commercial depicting a Soviet fashion show was to

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Two industries that have the same four-firm concentration ratio can have significantly different Herfindahl indexes.

Correct AnswerverifiedShow Answer

Product differentiation in monopolistic competition involves a trade-off between

Correct AnswerverifiedShow Answer

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