Question 1

Refer to Figure 26.2 for a monopolistically competitive firm.At the profit-maximizing output and price, this firm is experiencing economic

Accepted Answer

A)  Profits and should stay in this market in the long run.
B)  Profits but could make even higher economic profits producing the next best alternative good.
C)  Losses but should keep producing in the short run.
D)  Losses and should shut down in the short run.E) C) and D)
F) A) and D)

Question 2

In monopolistic competition, a firm's demand curve is tangent to the ATC curve in the long run because

Accepted Answer

A)  Barriers to entry are high.
B)  Entry eliminates economic profit, and exit eliminates losses.
C)  Advertising is ineffective in differentiating the product.
D)  Producers are price takers.E) All of the above
F) A) and B)

Question 3

Which of the following market structures will have lower output in the long run than perfect competition, ceteris paribus?

Accepted Answer

A)  Monopolistic competition, but not oligopoly or monopoly.
B)  Monopolistic competition, oligopoly, and monopoly.
C)  Monopolistic competition and oligopoly, but not monopoly.
D)  Oligopoly and monopoly, but not monopolistic competition.E) B) and C)
F) A) and D)

Question 4

Which of the following is an example of product differentiation?

Accepted Answer

A)  Two shampoos differ only in their labels, but consumers pay $0.20 more for the label they recognize.
B)  Sugar can be made from sugar beets or sugar cane, and consumers cannot tell the difference.
C)  Consumers substitute SUVs for cars because SUVs accommodate more passengers.
D)  Mills produce softwood and hardwood, but the two are used for different purposes.E) A) and B)
F) B) and D)

Question 5

Concentration ratios for monopolistically competitive markets typically fall in the range of 70 to 100 percent.

Accepted Answer

A) True 
 B)False

Question 6

Which of the firms in Figure 26.5 is most likely a monopoly?

Accepted Answer

A)  Firm A.
B)  Firm B.
C)  Firm C.
D)  Firm D.E) A) and C)
F) B) and C)

Question 7

Monopolistic competition results in

Accepted Answer

A)  Allocative efficiency.
B)  Production efficiency.
C)  The wrong mix of output.
D)  Marginal cost pricing.E) B) and C)
F) A) and C)

Question 8

Entry into a market characterized by monopolistic competition is generally

Accepted Answer

A)  Entirely blocked by existing firms.
B)  Very easy because few barriers exist.
C)  As difficult as in oligopoly.
D)  More difficult than entry into monopolized markets.E) All of the above
F) A) and B)

Question 9

Monopolistically competitive industries are characterized by all of the following except

Accepted Answer

A)  Homogenous products.
B)  Low entry barriers.
C)  Low concentration ratios.
D)  Independent production decisions.E) None of the above
F) B) and C)

Question 10

A monopolistically competitive firm can raise its price somewhat without fear of great change in unit sales because of

Accepted Answer

A)  Brand loyalty.
B)  Economies of scale.
C)  Inelastic demand.
D)  Large market shares of firms in the market.E) C) and D)
F) B) and D)

Question 11

If monopolistically competitive firms have some control over the prices they charge, why do they experience zero economic profits in the long run?

Accepted Answer

The key is the relatively easy entry int...

Question 12

Which of the following industries is not an example of monopolistic competition?

Accepted Answer

A)  Pizza delivery.
B)  Toys.
C)  Notebook computers.
D)  Airlines.E) B) and C)
F) B) and D)

Question 13

If economic profits are earned in a monopolistically competitive market,

Accepted Answer

A)  More firms will enter the market.
B)  The market supply curve will shift to the left.
C)  Price will rise.
D)  The market demand curve will shift to the right.E) A) and C)
F) A) and D)

Question 14

If new firms enter a monopolistically competitive market, the demand curves for the existing firms will

Accepted Answer

A)  Shift to the left.
B)  Shift to the right.
C)  Remain unchanged.
D)  Remain unchanged, but the market demand curve will shift to the right.E) A) and B)
F) B) and C)

Question 15

A distinguishing characteristic of monopolistic competition is that there are many firms in an industry.

Accepted Answer

A) True 
 B)False

Question 16

In monopolistic competition, a firm

Accepted Answer

A)  Uses marginal cost pricing.
B)  Uses nonprice competition.
C)  Faces a horizontal demand curve.
D)  Has no market power.E) B) and D)
F) A) and D)

Question 17

2 and MR2, then it will earn A) A positive economic profit, and firms will enter the industry. B) A positive economic profit, and firms will exit the industry. C) A negative economic profit, and firms will exit the industry. D) Zero economic profit, and neither entry nor exit will occur." class="answers-bank-image d-inline" rel="preload" > Refer to Figure 26.4 for a monopolistically competitive firm.If the firm currently faces Demand2 and MR2, then it will earn

Accepted Answer

A)  A positive economic profit, and firms will enter the industry.
B)  A positive economic profit, and firms will exit the industry.
C)  A negative economic profit, and firms will exit the industry.
D)  Zero economic profit, and neither entry nor exit will occur.E) B) and C)
F) All of the above

Question 18

If a monopolistic competitor lowers its price, it will attract a significant number of new customers.

Accepted Answer

A) True 
 B)False

Question 19

A concentration ratio measures the

Accepted Answer

A)  Proportion of industry output produced by all firms.
B)  Proportion of industry output produced by the largest firms.
C)  Dollar value of total industry output produced by all firms.
D)  Dollar value of total industry output produced by the largest firms.E) A) and B)
F) All of the above

Question 20

An In the News article titled "Selling "Pure Water": A $Billion Scam?" refers to the use of advertising.Successful advertising can do all of the following except

Accepted Answer

A)  Differentiate products.
B)  Create brand loyalty.
C)  Decrease the price elasticity of demand for the product.
D)  Maximize efficiency.E) B) and D)
F) None of the above

Exam 12: Monopolistic Competition

A concentration ratio measures the

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Refer to Figure 26.4 for a monopolistically competitive firm.If the firm currently faces Demand2 and MR2, then it will earn

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In monopolistic competition, a firm

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Which of the following market structures will have lower output in the long run than perfect competition, ceteris paribus?

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If economic profits are earned in a monopolistically competitive market,

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Entry into a market characterized by monopolistic competition is generally

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A monopolistically competitive firm can raise its price somewhat without fear of great change in unit sales because of

Correct AnswerverifiedShow Answer

Which of the firms in Figure 26.5 is most likely a monopoly?

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Monopolistic competition results in

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If a monopolistic competitor lowers its price, it will attract a significant number of new customers.

Correct AnswerverifiedShow Answer

An In the News article titled "Selling "Pure Water": A $Billion Scam?" refers to the use of advertising.Successful advertising can do all of the following except

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A distinguishing characteristic of monopolistic competition is that there are many firms in an industry.

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If new firms enter a monopolistically competitive market, the demand curves for the existing firms will

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Which of the following is an example of product differentiation?

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Monopolistically competitive industries are characterized by all of the following except

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Concentration ratios for monopolistically competitive markets typically fall in the range of 70 to 100 percent.

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Refer to Figure 26.2 for a monopolistically competitive firm.At the profit-maximizing output and price, this firm is experiencing economic

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In monopolistic competition, a firm's demand curve is tangent to the ATC curve in the long run because

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If monopolistically competitive firms have some control over the prices they charge, why do they experience zero economic profits in the long run?

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Which of the following industries is not an example of monopolistic competition?

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Refer to Figure 26.4 for a monopolistically competitive firm.If the firm currently faces Demand₂ and MR₂, then it will earn

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The key is the relatively easy entry int...
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