Question 1

Which of the following is most likely to be a monopolistically competitive firm?

Accepted Answer

A)  a soybean farmer
B)  a lettuce farmer
C)  a municipal water district
D)  a fast food restaurantE) All of the above
F) B) and D)

Question 2

In the long run in a monopolistically competitive market, a firm will, in theory,

Accepted Answer

A)  earn economic profits.
B)  suffer losses.
C)  break even.
D)  earn zero accounting profits.E) A) and B)
F) A) and C)

Question 3

A market situation in which a large number of firms produce similar but not identical products is

Accepted Answer

A)  a monopoly.
B)  an oligopoly.
C)  monopolistic competition.
D)  perfect competition.E) B) and D)
F) B) and C)

Question 4

-Use the above figure. The total profit earned by the monopolistically competitive firm is

Accepted Answer

A)  +$300.
B)  +$15.
C)  -$15.
D)  $0.E) None of the above
F) C) and D)

Question 5

If a firm that produces an information product uses marginal cost pricing, then the firm

Accepted Answer

A)  will earn negative profits.
B)  will earn profits equal to zero.
C)  will earn positive profits but could earn a higher profit by using a different method.
D)  will maximize profits.E) B) and D)
F) None of the above

Question 6

Monopolistically competitive firms advertise to attempt to

Accepted Answer

A)  lower their average variable costs.
B)  build brand loyalty.
C)  lower barriers to entry.
D)  increase barriers to entry.E) A) and B)
F) A) and C)

Question 7

For a monopolistic competitive firm, which of the following is true in the long run?

Accepted Answer

A)  ATC is minimized.
B)  Economic profit is zero.
C)  P = MC.
D)  All of the above.E) All of the above
F) B) and D)

Question 8

In the long run, both monopolistically competitive and perfectly competitive firms attain

Accepted Answer

A)  lowest cost production.
B)  positive economic profits.
C)  zero economic profits.
D)  productive efficiency.E) None of the above
F) B) and C)

Question 9

-In the long run, what level of economic profits can a monopolistic competitor expect to receive?

Accepted Answer

A)  positive
B)  zero
C)  negative
D)  either negative or positive, depending on the demand for its product and its costsE) None of the above
F) B) and C)

Question 10

-Refer to the above figure. The profit maximizing quantity for a monopolistic competitor is

Accepted Answer

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

Question 11

In a monopolistically competitive market, a firm should advertise to the point at which

Accepted Answer

A)  it is selling the most units it can possibly sell.
B)  the extra revenue from an additional dollar spent on advertising just equals the marginal cost of producing one more unit of the good.
C)  the additional revenue generated by one more dollar of advertising just equals the extra dollar cost of advertising.
D)  it can raise price to the highest level possible.E) All of the above
F) A) and D)

Question 12

The number of firms in a monopolistically competitive industry means that

Accepted Answer

A)  firms will collude.
B)  existing firms in the industry will make sure new firms do not enter.
C)  firms will not cooperate to set a pure monopoly price.
D)  firms will try to set a common price.E) All of the above
F) C) and D)

Question 13

By promoting its brand name heavily, the monopolistically competitive firm

Accepted Answer

A)  earns more profit in the long run.
B)  signals its long-term intention to stay in the industry.
C)  signals its intention to leave the industry.
D)  guarantees a short run profit.E) A) and B)
F) All of the above

Question 14

-Use the above figure. The total profit earned by this monopolistically competitive firm is

Accepted Answer

A)  $2,560.
B)  $1,600.
C)  $480.
D)  $1,900.E) A) and B)
F) B) and C)

Question 15

According to Edward Chamberlin, is the "differentness" of products a waste of resources? Explain.

Accepted Answer

According to Chamberlin, the "differentn...

Question 16

A monopolistic competitor is like a monopolist in the long run in that when economic profits are

Accepted Answer

A)  equal to zero, positive economic profits are made.
B)  equal to zero, economic profits are made.
C)  greater than zero, changes in output are due to changes to plants by existing firms and there is no entry.
D)  greater than zero, price exceeds marginal cost.E) All of the above
F) C) and D)

Question 17

The model of perfect competition and the model of monopolistic competition differ in that

Accepted Answer

A)  perfect competition assumes many buyers and sellers while monopolistic competition assumes many buyers but few sellers.
B)  perfect competition assumes easy entry of new firms while there are more significant barriers to entry in monopolistic competition.
C)  perfect competition assumes firms make zero profits in the long run and monopolistic competition assumes firms make positive profits.
D)  perfect competition assumes the product is homogeneous and monopolistic competition assumes the product is differentiated.E) A) and B)
F) A) and C)

Question 18

-Refer to the above figure. The above figure shows the cost structure of a firm producing an information product. Which curve represents average fixed cost?

Accepted Answer

A)  Curve 1
B)  Curve 2
C)  Curve 3
D)  Any of the 3 could be AFC.E) A) and D)
F) None of the above

Question 19

MR B) MC > P > ATC C) P > MC > ATC D) P = MC = MR" class="answers-bank-image d-inline" rel="preload" >
-Which of the following statements is true for a monopolistically competitive firm in the long run?

Accepted Answer

A)  P = ATC > MR
B)  MC > P > ATC
C)  P > MC > ATC
D)  P = MC = MRE) A) and B)
F) B) and C)

Question 20

The meaning of interdependence in a monopolistically competitive market is

Accepted Answer

A)  that it is difficult for firms to get together to collude.
B)  that products produced by firms will be good substitutes.
C)  that firms will not take into account the reaction of rival firms.
D)  that price rigging commonly occurs.E) A) and D)
F) C) and D)

Exam 25: Monopolistic Competition

The number of firms in a monopolistically competitive industry means that

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In the long run, both monopolistically competitive and perfectly competitive firms attain

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In a monopolistically competitive market, a firm should advertise to the point at which

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A market situation in which a large number of firms produce similar but not identical products is

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If a firm that produces an information product uses marginal cost pricing, then the firm

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The meaning of interdependence in a monopolistically competitive market is

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The model of perfect competition and the model of monopolistic competition differ in that

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-Which of the following statements is true for a monopolistically competitive firm in the long run?

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-Refer to the above figure. The above figure shows the cost structure of a firm producing an information product. Which curve represents average fixed cost?

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A monopolistic competitor is like a monopolist in the long run in that when economic profits are

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Monopolistically competitive firms advertise to attempt to

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-In the long run, what level of economic profits can a monopolistic competitor expect to receive?

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In the long run in a monopolistically competitive market, a firm will, in theory,

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For a monopolistic competitive firm, which of the following is true in the long run?

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According to Edward Chamberlin, is the "differentness" of products a waste of resources? Explain.

Correct AnswerverifiedAccording to Chamberlin, the "differentn...View AnswerShow Answer

-Use the above figure. The total profit earned by this monopolistically competitive firm is

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-Use the above figure. The total profit earned by the monopolistically competitive firm is

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Which of the following is most likely to be a monopolistically competitive firm?

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-Refer to the above figure. The profit maximizing quantity for a monopolistic competitor is

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By promoting its brand name heavily, the monopolistically competitive firm

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According to Chamberlin, the "differentn...
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