Question 1

A monopolistically competitive industry is like a purely competitive industry in that

Accepted Answer

A)  each firm produces a standardized product.
B)  nonprice competition is a feature in both industries.
C)  neither industry has significant barriers to entry.
D)  firms in both industries face a horizontal demand curve.E) A) and B)
F) None of the above

Question 2

When a monopolistically competitive firm is in long-run equilibrium,

Accepted Answer

A)  P = MC = ATC.
B)  MR = MC and minimum ATC > P.
C)  MR > MC and P = minimum ATC.
D)  MR = MC and P > minimum ATC.E) A) and B)
F) All of the above

Question 3

The demand curve faced by a monopolistically competitive firm

Accepted Answer

A)  is more elastic than the monopolist's demand curve.
B)  is less elastic than the monopolist's demand curve.
C)  will shift outward as new firms enter the industry.
D)  is more elastic than the demand curve faced by the purely competitive firm.E) C) and D)
F) B) and D)

Question 4

The variety of products and features that consumers may choose from in monopolistically competitive industries

Accepted Answer

A)  at least partially offsets the economic inefficiencies of this market structure.
B)  leads to an optimal allocation of resources in the market structure.
C)  guarantees that firms produce at full-capacity output levels.
D)  makes the demand curves facing firms in these industries perfectly elastic.E) B) and D)
F) A) and D)

Question 5

In which industry is monopolistic competition most likely to be found?

Accepted Answer

A)  utilities
B)  agriculture
C)  retail trade
D)  miningE) B) and D)
F) B) and C)

Question 6

Monopolistically competitive firms

Accepted Answer

A)  realize normal profits in the short run but losses in the long run.
B)  incur persistent losses in both the short run and long run.
C)  may realize either profits or losses in the short run but realize normal profits in the long run.
D)  persistently realize economic profits in both the short run and long run.E) A) and C)
F) None of the above

Question 7

As firms exit from a monopolistically competitive industry in the long run, the remaining firmsâ€™ profits will begin to rise.

Accepted Answer

A) True 
 B)False

Question 8

The downward-sloping demand curve of a monopolistic competitor

Accepted Answer

A)  reflects some level of control over its own price.
B)  becomes eventually horizontal in the long run.
C)  indicates collusion among the members of the product group.
D)  ensures that the firm will produce at minimum average cost in the long run.E) A) and D)
F) None of the above

Question 9

Firms in an industry will not earn long-run economic profits if

Accepted Answer

A)  fixed costs are zero.
B)  the number of firms in the industry is fixed.
C)  there is free entry and exit of firms in the industry.
D)  production costs for a given level of output are minimized.E) B) and D)
F) All of the above

Question 10

(Last Word)  Raising the minimum wage in the restaurant industry

Accepted Answer

A)  affects mom and pop and chain restaurants about the same.
B)  benefits both mom and pop and chain restaurants by boosting demand.
C)  makes it more difficult for mom and pop restaurants to compete with highly capitalized chain restaurants.
D)  gives mom and pop restaurants a competitive advantage over highly capitalized chain restaurants.E) None of the above
F) A) and D)

Question 11

The goal of product differentiation and advertising in monopolistic competition is to make

Accepted Answer

A)  the firm allocatively efficient even if it is not productively efficient.
B)  the firm productively efficient even if it is not allocatively efficient.
C)  price less of a factor and product differences more of a factor in consumer purchases.
D)  price more of a factor and product differences less of a factor in consumer purchases.E) A) and B)
F) B) and C)

Question 12

In the long run, a monopolistically competitive firm

Accepted Answer

A)  earns an economic profit.
B)  produces where P = ATC.
C)  produces where MR exceeds MC.
D)  achieves allocative efficiency.E) A) and D)
F) All of the above

Question 13

Which is true of pure competition but not of monopolistic competition?

Accepted Answer

A)  There are no significant barriers to entry.
B)  Long-run economic profits are zero.
C)  There are a large number of firms in the market.
D)  Long-run equilibrium occurs at the minimum point on the ATC curve.E) A) and B)
F) A) and C)

Question 14

(Consider This)  Which of the following statements is most accurate about the difference between goods produced under the old central planning model of the Soviet Union versus those produced by American capitalism?

Accepted Answer

A)  Soviet markets were purely competitive, while U.S.markets were more monopolistically competitive.
B)  Soviet production employed mass production techniques, while American capitalism did not.
C)  Soviet production put greater emphasis on efficiency, while American capitalism allowed for much more product differentiation.
D)  Product differentiation in the Soviet Union was carefully integrated into the central plan, while differentiation in American capitalism occurs haphazardly and with little forethought.E) A) and B)
F) None of the above

Question 15

The more elastic a monopolistic competitor's long-run demand curve, the

Accepted Answer

A)  greater its excess capacity.
B)  higher its price relative to that of a pure competitor having the same cost curves.
C)  lower its long-run economic profit.
D)  lower its average total cost at its profit-maximizing level of output.E) C) and D)
F) B) and C)

Question 16

The economic inefficiencies of monopolistic competition may be offset by the fact that

Accepted Answer

A)  advertising expenditures shift the average cost curve upward.
B)  available capacity is fully utilized.
C)  resources are optimally allocated to the production of the product.
D)  consumers have increased product variety.E) A) and B)
F) A) and C)

Question 17

The excess capacity problem associated with monopolistic competition implies that fewer firms could produce the same industry output at a lower total cost.

Accepted Answer

A) True 
 B)False

Question 18

Which of the following statements is correct?

Accepted Answer

A)  Purely competitive firms, monopolistically competitive firms, and pure monopolies all earn zero economic profits in the long run.
B)  Purely competitive firms, monopolistically competitive firms, and pure monopolies all earn positive economic profits in the long run.
C)  In the long run, purely competitive firms and monopolistically competitive firms earn zero economic profits, while pure monopolies may or may not earn economic profits.
D)  Monopolistically competitive firms earn zero economic profits in both the short run and the long run.E) A) and B)
F) A) and C)

Question 19

The market situation of a monopolistic competitor is made more complex than our simple revenue-and-costs graphs would suggest, because the firm in reality juggles three decisions:

Accepted Answer

A)  price, output quantity, and revenues.
B)  revenue, costs, and profits.
C)  advertising, resources, and product.
D)  price, product, and advertising.E) A) and C)
F) B) and C)

Question 20

Which of the following characteristics provide a monopolistically competitive firm some monopoly power?

Accepted Answer

A)  significant barriers to entry into the industry
B)  product differentiation
C)  a low concentration ratio in the industry
D)  price discriminationE) B) and C)
F) A) and C)

Exam 13: Monopolistic Competition

The economic inefficiencies of monopolistic competition may be offset by the fact that

Correct AnswerverifiedShow Answer

(Last Word) Raising the minimum wage in the restaurant industry

Correct AnswerverifiedShow Answer

The variety of products and features that consumers may choose from in monopolistically competitive industries

Correct AnswerverifiedShow Answer

As firms exit from a monopolistically competitive industry in the long run, the remaining firmsâ€™ profits will begin to rise.

Correct AnswerverifiedShow Answer

The downward-sloping demand curve of a monopolistic competitor

Correct AnswerverifiedShow Answer

A monopolistically competitive industry is like a purely competitive industry in that

Correct AnswerverifiedShow Answer

In the long run, a monopolistically competitive firm

Correct AnswerverifiedShow Answer

(Consider This) Which of the following statements is most accurate about the difference between goods produced under the old central planning model of the Soviet Union versus those produced by American capitalism?

Correct AnswerverifiedShow Answer

When a monopolistically competitive firm is in long-run equilibrium,

Correct AnswerverifiedShow Answer

The market situation of a monopolistic competitor is made more complex than our simple revenue-and-costs graphs would suggest, because the firm in reality juggles three decisions:

Correct AnswerverifiedShow Answer

Monopolistically competitive firms

Correct AnswerverifiedShow Answer

Which is true of pure competition but not of monopolistic competition?

Correct AnswerverifiedShow Answer

The goal of product differentiation and advertising in monopolistic competition is to make

Correct AnswerverifiedShow Answer

Which of the following characteristics provide a monopolistically competitive firm some monopoly power?

Correct AnswerverifiedShow Answer

Firms in an industry will not earn long-run economic profits if

Correct AnswerverifiedShow Answer

The excess capacity problem associated with monopolistic competition implies that fewer firms could produce the same industry output at a lower total cost.

Correct AnswerverifiedShow Answer

Which of the following statements is correct?

Correct AnswerverifiedShow Answer

The more elastic a monopolistic competitor's long-run demand curve, the

Correct AnswerverifiedShow Answer

The demand curve faced by a monopolistically competitive firm

Correct AnswerverifiedShow Answer

In which industry is monopolistic competition most likely to be found?

Correct AnswerverifiedShow Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified