Question 1

Exhibit 10-2 A monopolistic competitive firm

Comparing the monopolistically competitive firm in Exhibit 10-2 to the long-run profit-maximizing outcome for a perfectly competitive firm with a price of $15 per unit and a quantity of 600,

Accepted Answer

A)   the quantity produced by the monopolistically competitive firm is higher than that of the perfectly competitive firm.
B)   the profit earned by the monopolistically competitive firm is higher than that of the perfectly competitive firm.
C)   the marginal revenue of the monopolistically competitive firm is lower than that of the perfectly competitive firm at the profit-maximizing quantity.
D)   the long run average cost of the monopolistically competitive firm is higher than that of the perfectly competitive firm at the profit-maximizing quantity.

Question 2

Which of the following most closely approximates the conditions of a monopolistically competitive market?

Accepted Answer

A)   The market for Grade A eggs, which is characterized by a large number of firms producing a homogeneous product.
B)   The restaurant industry, which is characterized by firms producing a differentiated product in a market with low entry barriers.
C)   Local cable television service, where a licensed supplier competes with firms offering satellite service.
D)   The market for jumbo aircraft, where one major domestic firm competes with one major foreign firm.

Question 3

Which of the following is a distinction between perfectly competitive and monopolistic competition?

Accepted Answer

A)   Perfectly competitive firms must compete with rival sellers; monopolistically competitive firms do not confront rival sellers.
B)   Monopolistically competitive firms can raise their price without losing sales; perfectly competitive firms must lower their price in order to sell more of their product.
C)   Perfectly competitive firms confront a perfectly elastic demand curve; monopolistically competitive firms face a downward-sloping demand curve.
D)   Perfectly competitive firms may make either economic profits or losses in the short run, but monopolistically competitive firms always earn an economic profit.

Question 4

Exhibit 10-2 A monopolistic competitive firm

To maximize long-run profits, the monopolistically competitive firm shown in Exhibit 10-2 will charge a price per unit of:

Accepted Answer

A)   zero.
B)   $5.
C)   $10.
D)   $15.

Question 5

Exhibit 10-2 A monopolistic competitive firm

If all firms in a monopolistic competitive industry have demand and cost curves like those shown in Exhibit 10-2, we would expect that in the long run:

Accepted Answer

A)   all firms will leave the industry.
B)   some firms will leave the industry.
C)   firms in the industry earn zero economic profits.
D)   a number of new firms will enter the industry. C

Question 6

In monopolistic competition if there is profit, there is:

Accepted Answer

A)   a signal for new firms to enter.
B)   a motive for existing firms to increase prices.
C)   proof that advertising works.
D)   a motive for existing firms to decrease prices.

Question 7

When the price and output decisions of one firm include the possible price and output reactions of the firm's rivals, the market is

Accepted Answer

A)   a monopoly characterized by differentiated products.
B)   an oligopoly characterized by mutual interdependence.
C)   perfectly competitive characterized by collusion.
D)   monopolistically competitive characterized by nonprice competition.

Question 8

Exhibit 10-1 A monopolistic competitive firm

As represented in Exhibit 10-1, the maximum long-run economic profit earned by this monopolistic competitive firm is:

Accepted Answer

A)   zero.
B)   $200 per day.
C)   $1,000 per day.
D)   $20,000 per day.

Question 9

The kinked demand theory attempts to explain why an oligopolistic firm:

Accepted Answer

A)   has relatively large advertising expenditures.
B)   fails to invest in research and development.
C)   infrequently changes its price.
D)   engages in excessive brand proliferation. C

Question 10

The industry that most closely approximates the conditions of the oligopoly model is:

Accepted Answer

A)   restaurants.
B)   retail clothing.
C)   home construction.
D)   tires.

Question 11

As a result of a kinked demand curve, the price:

Accepted Answer

A)   fluctuates.
B)   falls below the kink.
C)   settles at the kink.
D)   rises above the kink.

Question 12

The market for Product A has many sellers, selling identical products, each earning an economic profit of zero in the long run. The market for Product B has many sellers, selling differentiated products, each earning an economics profit of zero in the long run. Given this information, one can conclude that

Accepted Answer

A)   The markets for Product A and Product B are perfectly competitive.
B)   The markets for Product A and Product B are monopolistically competitive.
C)   The market for Product A is monopolistically competitive and the market for Product B is perfectly competitive.
D)   The market for Product A is perfectly competitive and the market for Product B is monopolistically competitive.

Question 13

Monopolistic competition is inefficient because:

Accepted Answer

A)   firms earn positive economic profits.
B)   the firms' marginal costs and marginal revenues are not equal.
C)   firms have excess capacity in the long run.
D)   entry is difficult.

Question 14

Which of the following is always associated with monopolistic competition?

Accepted Answer

A)   identical products
B)   economic profits in the short run
C)   product differentiation
D)   Demand curves become more inelastic as new entry occurs.

Question 15

The theory of monopolistic competition predicts that in long-run equilibrium a monopolistically competitive firm will:

Accepted Answer

A)   produce the output level at which price equals long-run marginal cost.
B)   operate at minimum long-run average cost.
C)   overutilize its insufficient capacity.
D)   produce the output level at which price equals long-run average cost.

Question 16

Suppose Ford, GM, and Dodge make the majority of pick-up trucks sold in the United States If they all sell for approximately the same price, and Ford offers a $2,000 rebate on new truck sales, what can Ford expect to see?

Accepted Answer

A)   an unprecedented increase in truck sales
B)   an immediate response by GM and Dodge
C)   a visit from the antitrust authorities of the government
D)   a revolution from Ford stockholders

Question 17

Compared to monopoly, the market results with monopolistic competition are usually expected to be:

Accepted Answer

A)   worse because consumers get fewer choices.
B)   worse because consumers pay a higher price.
C)   better because consumers pay a lower price.
D)   better because consumers get less output.

Question 18

The automobile, steel, and oil markets are all examples of:

Accepted Answer

A)   perfectly competitive markets.
B)   monopolies.
C)   monopolistically competitive markets.
D)   oligopolies. D

Question 19

Which of the following is true for perfect competition, monopolistic competition, and monopoly?

Accepted Answer

A)   The product of all firms is homogeneous.
B)   Firms will earn zero economic profits in the long run.
C)   Short-run profits are maximized when marginal cost equals marginal revenue.
D)   Price is greater than marginal cost at the profit-maximizing quantity.

Question 20

In long-run equilibrium, output is expanded to the minimum long-run average total cost by:

Accepted Answer

A)   perfectly competitive firms but not by monopolistically competitive firms.
B)   monopolistically competitive firms but not by perfectly competitive firms.
C)   both monopolistically competitive firms and perfectly competitive firms.
D)   neither perfectly competitive firms nor monopolistically competitive firms.

Exam 10: Monopolistic Competition and Oligopoly

Exhibit 10-2 A monopolistic competitive firm Comparing the monopolistically competitive firm in Exhibit 10-2 to the long-run profit-maximizing outcome for a perfectly competitive firm with a price of $15 per unit and a quantity of 600,

Correct Answer
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Which of the following most closely approximates the conditions of a monopolistically competitive market?

Correct Answer
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Which of the following is a distinction between perfectly competitive and monopolistic competition?

Correct Answer
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Exhibit 10-2 A monopolistic competitive firm To maximize long-run profits, the monopolistically competitive firm shown in Exhibit 10-2 will charge a price per unit of:

Correct Answer
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Exhibit 10-2 A monopolistic competitive firm If all firms in a monopolistic competitive industry have demand and cost curves like those shown in Exhibit 10-2, we would expect that in the long run:

Correct Answer
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C

In monopolistic competition if there is profit, there is:

Correct Answer
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When the price and output decisions of one firm include the possible price and output reactions of the firm's rivals, the market is

Correct Answer
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Exhibit 10-1 A monopolistic competitive firm As represented in Exhibit 10-1, the maximum long-run economic profit earned by this monopolistic competitive firm is:

Correct Answer
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The kinked demand theory attempts to explain why an oligopolistic firm:

Correct Answer
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C

The industry that most closely approximates the conditions of the oligopoly model is:

Correct Answer
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As a result of a kinked demand curve, the price:

Correct Answer
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Monopolistic competition is inefficient because:

Correct Answer
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Which of the following is always associated with monopolistic competition?

Correct Answer
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The theory of monopolistic competition predicts that in long-run equilibrium a monopolistically competitive firm will:

Correct Answer
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Suppose Ford, GM, and Dodge make the majority of pick-up trucks sold in the United States If they all sell for approximately the same price, and Ford offers a $2,000 rebate on new truck sales, what can Ford expect to see?

Correct Answer
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Compared to monopoly, the market results with monopolistic competition are usually expected to be:

Correct Answer
verified

The automobile, steel, and oil markets are all examples of:

Correct Answer
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D

Which of the following is true for perfect competition, monopolistic competition, and monopoly?

Correct Answer
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In long-run equilibrium, output is expanded to the minimum long-run average total cost by:

Correct Answer
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Exam 10: Monopolistic Competition and Oligopoly

Exhibit 10-2 A monopolistic competitive firm Comparing the monopolistically competitive firm in Exhibit 10-2 to the long-run profit-maximizing outcome for a perfectly competitive firm with a price of $15 per unit and a quantity of 600,

Correct AnswerverifiedShow Answer

Which of the following most closely approximates the conditions of a monopolistically competitive market?

Correct AnswerverifiedShow Answer

Which of the following is a distinction between perfectly competitive and monopolistic competition?

Correct AnswerverifiedShow Answer

Exhibit 10-2 A monopolistic competitive firm To maximize long-run profits, the monopolistically competitive firm shown in Exhibit 10-2 will charge a price per unit of:

Correct AnswerverifiedShow Answer

Exhibit 10-2 A monopolistic competitive firm If all firms in a monopolistic competitive industry have demand and cost curves like those shown in Exhibit 10-2, we would expect that in the long run:

Correct AnswerverifiedC

In monopolistic competition if there is profit, there is:

Correct AnswerverifiedShow Answer

When the price and output decisions of one firm include the possible price and output reactions of the firm's rivals, the market is

Correct AnswerverifiedShow Answer

Exhibit 10-1 A monopolistic competitive firm As represented in Exhibit 10-1, the maximum long-run economic profit earned by this monopolistic competitive firm is:

Correct AnswerverifiedShow Answer

The kinked demand theory attempts to explain why an oligopolistic firm:

Correct AnswerverifiedC

The industry that most closely approximates the conditions of the oligopoly model is:

Correct AnswerverifiedShow Answer

As a result of a kinked demand curve, the price:

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Monopolistic competition is inefficient because:

Correct AnswerverifiedShow Answer

Which of the following is always associated with monopolistic competition?

Correct AnswerverifiedShow Answer

The theory of monopolistic competition predicts that in long-run equilibrium a monopolistically competitive firm will:

Correct AnswerverifiedShow Answer

Suppose Ford, GM, and Dodge make the majority of pick-up trucks sold in the United States If they all sell for approximately the same price, and Ford offers a $2,000 rebate on new truck sales, what can Ford expect to see?

Correct AnswerverifiedShow Answer

Compared to monopoly, the market results with monopolistic competition are usually expected to be:

Correct AnswerverifiedShow Answer

The automobile, steel, and oil markets are all examples of:

Correct AnswerverifiedD

Which of the following is true for perfect competition, monopolistic competition, and monopoly?

Correct AnswerverifiedShow Answer

In long-run equilibrium, output is expanded to the minimum long-run average total cost by:

Correct AnswerverifiedShow Answer

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C

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C

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D

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