Question 1

Refer to the information provided in Figure 15.1 below to answer the question(s)  that follow. Below are cost curves for Dom's Barber Shop, a monopolistically competitive firm.  Figure 15.1
-Refer to Figure 15.1. From society's point of view, the efficient level of output is

Accepted Answer

A)   20 haircuts.
B)   23 haircuts.
C)   25 haircuts.
D)   30 haircuts.E) C) and D)
F) A) and B)

Question 2

Firms gain control over price in monopolistic competition by

Accepted Answer

A)   blocking entry of other firms into the industry.
B)   producing a product for which there are no close substitutes.
C)   differentiating their products.
D)   colluding with other firms to set prices.E) None of the above
F) B) and C)

Question 3

Related to the Economics in Practice on page 314: According to the Economics in Practice, which of the following statements is true?

Accepted Answer

A)   Because tastes tend to differ across areas, we would expect to see a wider variety of products available from an online retailer than from an individual brick-and-mortar retailer.
B)   Even though tastes tend to differ across areas, we tend to see a smaller variety of products available from an online retailer than from an individual brick-and-mortar retailer.
C)   Because tastes tend to be roughly the same across areas, we would expect to see a about the same variety of products available from an online retailer as from an individual brick-and-mortar retailer.
D)   Because tastes tend to differ across areas, we would expect to see a smaller variety of products available from an online retailer than from an individual brick-and-mortar retailer.E) B) and D)
F) All of the above

Question 4

When MR = MC and P = ATC for a monopolistically competitive firm, the firm is in

Accepted Answer

A)   short‐run disequilibrium.
B)   long‐run disequilibrium.
C)   long‐run equilibrium.
D)   neither short‐run nor long‐run equilibrium.E) A) and B)
F) All of the above

Question 5

Firms ________ in monopolistic competition due to product differentiation.

Accepted Answer

A)   have no control over price
B)   have blocked entry
C)   gain control over price
D)   are limited in numberE) A) and D)
F) A) and C)

Question 6

In the long run, a monopolistically competitive firm that is incurring a loss will ________ if total revenue is less than variable costs.

Accepted Answer

A)   continue to produce its current output
B)   shut down
C)   increase its output
D)   decrease its outputE) All of the above
F) B) and D)

Question 7

Refer to the information provided in Figure 15.2 below to answer the question(s)  that follow.  Figure 15.2
-Refer to Figure 15.2. If We Do Hair is maximizing profit as a monopolistically competitive firm, its total costs are

Accepted Answer

A)   $1,200.
B)   $960.
C)   $800.
D)   $660.E) B) and D)
F) A) and B)

Question 8

Monopolistically competitive firms can use product differentiation to do which of the following?

Accepted Answer

A)   guarantee long-run profitability
B)   block entry of all other firms
C)   provide consumers with commitment devices
D)   gain complete control over the price of their productE) A) and B)
F) A) and C)

Question 9

Firms will ________ a monopolistically competitive market until ________ are eliminated.

Accepted Answer

A)   enter; losses
B)   enter; profits
C)   exit; short-run profits
D)   exit; long-run profitsE) B) and C)
F) All of the above

Question 10

Refer to the information provided in Figure 15.4 below to answer the question(s)  that follow.  Figure 15.4
-Refer to Figure 15.4. Assume The Hand Made Shirt Shop has fixed costs of $150 and is a monopolistically competitive firm. To maximize profits in the short run, this firm should set a price of

Accepted Answer

A)   $18.
B)   $22.
C)   $23.
D)   $25.E) A) and C)
F) None of the above

Question 11

The case for advertising includes the fact that

Accepted Answer

A)   it wastes society's scarce resources.
B)   firms spend large sums of money to create meaningless differences among products.
C)   it provides consumers with valuable information about product availability, quality, and price.
D)   it creates wants that otherwise would not have existed.E) None of the above
F) A) and B)

Question 12

Refer to the information provided in Figure 15.5 below to answer the question(s)  that follow.  Figure 15.5
-Refer to Figure 15.5. In the long run in this monopolistically competitive industry

Accepted Answer

A)   some firms will enter the industry and industry profits will increase.
B)   some firms will leave the industry until the remaining firms break even economically.
C)   all firms will leave the industry.
D)   product supply will increase so prices will go up.E) C) and D)
F) A) and B)

Question 13

Compared to a perfectly competitive firm, the demand schedule of a monopolistically competitive firm faces is

Accepted Answer

A)   more price elastic.
B)   less price elastic.
C)   perfectly price elastic.
D)   perfectly price inelastic.E) A) and D)
F) B) and C)

Question 14

The case for product differentiation does not include the fact that

Accepted Answer

A)   products that satisfy a real demand survive.
B)   standards of living rise with product innovation.
C)   new products satisfy people with different preferences.
D)   it wastes society's scarce resources.E) B) and D)
F) B) and C)

Question 15

The pizza delivery industry is monopolistically competitive. Little Joe's Pizzeria raises its prices by 10%, but all the other pizzerias in town keep their prices the same. Which of the following is most likely to occur?

Accepted Answer

A)   Little Joe's Pizzeria will not be able to sell any pizzas, because it was the only firm to raise its price.
B)   Little Joe's Pizzeria will lose some of its customers.
C)   Little Joe's Pizzeria's profits will increase.
D)   The number of customers served by Little Joe's Pizzeria will increase.E) None of the above
F) All of the above

Question 16

Refer to the information provided in Figure 15.4 below to answer the question(s)  that follow.  Figure 15.4
-Refer to Figure 15.4. Assume The Hand Made Shirt Shop has fixed costs of $90 and is a monopolistically competitive firm. To maximize profits in the short run, the firm should produce ________ personalized sweatshirts.

Accepted Answer

A)   0
B)   50
C)   70
D)   75E) A) and B)
F) A) and C)

Question 17

Refer to the information provided in Figure 15.2 below to answer the question(s)  that follow.  Figure 15.2
-Refer to Figure 15.2. If We Do Hair is maximizing profit as a monopolistically competitive firm, it is earning a profit of

Accepted Answer

A)   $180.
B)   $220.
C)   $320.
D)   $480.E) A) and D)
F) B) and C)

Question 18

Related to the Economics in Practice on p. 316. Producers of Honest Tea add less sugar to their tea than the amount that would maximize consumer's total utility from sugar because

Accepted Answer

A)   the financial cost of the additional sugar is less than the additional revenue that the firm would earn.
B)   producers are attempting to differentiate their product from the very sweet Snapple.
C)   the marginal utility to the consumer from adding more sugar is very low (near zero)  while the marginal health cost (added calories)  is quite high.
D)   producers are attempting to market their product to diabetics.E) None of the above
F) B) and C)

Question 19

Monopolistically competitive firms ________ because in long-run equilibrium price is ________ marginal cost.

Accepted Answer

A)   prevent the efficient use of resources; less than
B)   prevent the efficient use of resources; greater than
C)   use resources efficiently; greater than
D)   use resources efficiently; equal toE) All of the above
F) None of the above

Question 20

For a monopolistically competitive firm in long-run equilibrium

Accepted Answer

A)   the demand curve must intersect the average total cost curve at the ATC curve minimum.
B)   the demand curve must be tangent to the average total cost curve at the ATC curve minimum.
C)   at the profit-maximizing quantity, the demand curve must intersect the average total cost curve.
D)   at the profit-maximizing quantity, the demand curve must be tangent to the average total cost curve.E) A) and C)
F) B) and C)

Exam 15: Monopolistic Competition

When MR = MC and P = ATC for a monopolistically competitive firm, the firm is in

Correct Answer
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Refer to the information provided in Figure 15.4 below to answer the question(s) that follow. Figure 15.4 -Refer to Figure 15.4. Assume The Hand Made Shirt Shop has fixed costs of $150 and is a monopolistically competitive firm. To maximize profits in the short run, this firm should set a price of

Correct Answer
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Monopolistically competitive firms can use product differentiation to do which of the following?

Correct Answer
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Refer to the information provided in Figure 15.2 below to answer the question(s) that follow. Figure 15.2 -Refer to Figure 15.2. If We Do Hair is maximizing profit as a monopolistically competitive firm, its total costs are

Correct Answer
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The pizza delivery industry is monopolistically competitive. Little Joe's Pizzeria raises its prices by 10%, but all the other pizzerias in town keep their prices the same. Which of the following is most likely to occur?

Correct Answer
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Refer to the information provided in Figure 15.2 below to answer the question(s) that follow. Figure 15.2 -Refer to Figure 15.2. If We Do Hair is maximizing profit as a monopolistically competitive firm, it is earning a profit of

Correct Answer
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Monopolistically competitive firms because in long-run equilibrium price is marginal cost.

Correct Answer
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In the long run, a monopolistically competitive firm that is incurring a loss will ________ if total revenue is less than variable costs.

Correct Answer
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Related to the Economics in Practice on p. 316. Producers of Honest Tea add less sugar to their tea than the amount that would maximize consumer's total utility from sugar because

Correct Answer
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Compared to a perfectly competitive firm, the demand schedule of a monopolistically competitive firm faces is

Correct Answer
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Refer to the information provided in Figure 15.1 below to answer the question(s) that follow. Below are cost curves for Dom's Barber Shop, a monopolistically competitive firm. Figure 15.1 -Refer to Figure 15.1. From society's point of view, the efficient level of output is

Correct Answer
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The case for advertising includes the fact that

Correct Answer
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For a monopolistically competitive firm in long-run equilibrium

Correct Answer
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Firms ________ in monopolistic competition due to product differentiation.

Correct Answer
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Related to the Economics in Practice on page 314: According to the Economics in Practice, which of the following statements is true?

Correct Answer
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Firms will a monopolistically competitive market until are eliminated.

Correct Answer
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Firms gain control over price in monopolistic competition by

Correct Answer
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The case for product differentiation does not include the fact that

Correct Answer
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Refer to the information provided in Figure 15.5 below to answer the question(s) that follow. Figure 15.5 -Refer to Figure 15.5. In the long run in this monopolistically competitive industry

Correct Answer
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Exam 15: Monopolistic Competition

When MR = MC and P = ATC for a monopolistically competitive firm, the firm is in

Correct AnswerverifiedShow Answer

Refer to the information provided in Figure 15.4 below to answer the question(s) that follow. Figure 15.4 -Refer to Figure 15.4. Assume The Hand Made Shirt Shop has fixed costs of $150 and is a monopolistically competitive firm. To maximize profits in the short run, this firm should set a price of

Correct AnswerverifiedShow Answer

Monopolistically competitive firms can use product differentiation to do which of the following?

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Refer to the information provided in Figure 15.2 below to answer the question(s) that follow. Figure 15.2 -Refer to Figure 15.2. If We Do Hair is maximizing profit as a monopolistically competitive firm, its total costs are

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The pizza delivery industry is monopolistically competitive. Little Joe's Pizzeria raises its prices by 10%, but all the other pizzerias in town keep their prices the same. Which of the following is most likely to occur?

Correct AnswerverifiedShow Answer

Refer to the information provided in Figure 15.2 below to answer the question(s) that follow. Figure 15.2 -Refer to Figure 15.2. If We Do Hair is maximizing profit as a monopolistically competitive firm, it is earning a profit of

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Monopolistically competitive firms ________ because in long-run equilibrium price is ________ marginal cost.

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In the long run, a monopolistically competitive firm that is incurring a loss will ________ if total revenue is less than variable costs.

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Related to the Economics in Practice on p. 316. Producers of Honest Tea add less sugar to their tea than the amount that would maximize consumer's total utility from sugar because

Correct AnswerverifiedShow Answer

Compared to a perfectly competitive firm, the demand schedule of a monopolistically competitive firm faces is

Correct AnswerverifiedShow Answer

Refer to the information provided in Figure 15.1 below to answer the question(s) that follow. Below are cost curves for Dom's Barber Shop, a monopolistically competitive firm. Figure 15.1 -Refer to Figure 15.1. From society's point of view, the efficient level of output is

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The case for advertising includes the fact that

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For a monopolistically competitive firm in long-run equilibrium

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Firms ________ in monopolistic competition due to product differentiation.

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Related to the Economics in Practice on page 314: According to the Economics in Practice, which of the following statements is true?

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Firms will ________ a monopolistically competitive market until ________ are eliminated.

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Firms gain control over price in monopolistic competition by

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The case for product differentiation does not include the fact that

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Refer to the information provided in Figure 15.5 below to answer the question(s) that follow. Figure 15.5 -Refer to Figure 15.5. In the long run in this monopolistically competitive industry

Correct AnswerverifiedShow Answer

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Monopolistically competitive firms because in long-run equilibrium price is marginal cost.

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Firms will a monopolistically competitive market until are eliminated.

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