Quiz 13: Monopolistic Competition
Business
Q 1Q 1
In monopolistic competition
A)firms practice product differentiation.
B)the goods produced by each firm are identical.
C)firms do not have any control over the price of their products.
D)there are barriers to entry.
E)a small number of firms compete.
Free
Multiple Choice
A
Q 2Q 2
Toronto has a large number of retail stores that sell clothes.Each store has its own characteristics which differ from the other stores.The clothing business in Toronto is an example of
A)a duopoly.
B)an oligopoly.
C)a perfectly competitive market.
D)a monopoly.
E)a monopolistically competitive market.
Free
Multiple Choice
E
Q 3Q 3
A firm in a monopolistically competitive market
A)faces an upward-sloping demand curve.
B)faces a downward-sloping demand curve.
C)does not practice product differentiation.
D)faces a horizontal demand curve.
E)has few competitors.
Free
Multiple Choice
B
Q 4Q 4
One factor that distinguishes a monopoly from monopolistic competition is that
A)firms in monopolistic competition practice collusion.
B)no barriers to entry exist in a monopoly.
C)barriers to exit exist in monopolistic competition.
D)close substitutes are available in monopolistic competition.
E)firms are price-takers in monopolistic competition.
Free
Multiple Choice
Q 5Q 5
In monopolistic competition
A)there are two firms in the market.
B)collusion is not possible.
C)the size of one firm is large relative to the size of the industry.
D)each firm is a price-taker.
E)there is only one firm in the market.
Free
Multiple Choice
Q 6Q 6
If some firms in the industry make an economic profit,then
A)the industry cannot be perfectly competitive.
B)the industry must be monopolistically competitive.
C)rival firms will enter if there are no barriers to entry.
D)the firms must practice product differentiation.
E)the industry must be an oligopoly.
Free
Multiple Choice
Q 7Q 7
A monopolistically competitive firm is able to influence the price of what it sells because of
A)barriers to entry.
B)economies of scale.
C)product differentiation.
D)the fact there are many buyers.
E)inelastic demand.
Free
Multiple Choice
Q 8Q 8
In monopolistic competition
A)firms can collude.
B)each firm has a small market share.
C)each firm pays attention to every other firm.
D)firms make an economic profit in the long run.
E)no firms advertise.
Free
Multiple Choice
Q 9Q 9
ACME,Inc.operates in a market structure in which there are many other firms that find it easy to enter or exit.ACME is operating in ________ market.
A)a perfectly competitive market but not a monopolistically competitive
B)a perfectly competitive or a monopolistically competitive
C)a monopolistically competitive market but not a perfectly competitive
D)neither a perfectly competitive nor a monopolistically competitive
E)a monopolistic
Free
Multiple Choice
Q 10Q 10
The existence of a large number of firms in monopolistic competition
A)means that each firm has a small market share.
B)makes it possible for each firm's price to deviate by a large amount from the average price of the other firms.
C)means that a firm must pay attention to the behaviour of all of its competitors.
D)makes collusion highly likely.
E)means that each firm is a price taker.
Free
Multiple Choice
Q 11Q 11
The key feature of monopolistic competition that distinguishes it from perfect competition is
A)many sellers.
B)barriers to entry.
C)perfectly elastic demand.
D)product differentiation.
E)perfectly inelastic demand.
Free
Multiple Choice
Q 12Q 12
In monopolistic competition,firms compete on the basis of
A)price only.
B)price,quality,and marketing.
C)marketing only.
D)quality and marketing,but not price.
E)quality only.
Free
Multiple Choice
Q 13Q 13
In monopolistic competition,each firm supplies a ________ part of the total industry output and its actions ________ the actions of the other firms.
A)small;do not directly affect
B)small;directly affect
C)large;do not directly affect
D)large;directly affect
E)large;may or may not directly affect
Free
Multiple Choice
Q 14Q 14
Monopolistic competition differs from monopoly because in monopolistic competition firms
A)maximize economic profit.
B)set marginal revenue equal to marginal cost to maximize profit.
C)are free to enter and exit.
D)are price takers.
E)make an economic profit in the long run.
Free
Multiple Choice
Q 15Q 15
Dole Co.operates in a monopolistically competitive market.Which of the following does not characterize Dole Co.'s market?
A)Dole Co.supplies a small portion of the market's output.
B)Dole Co.'s product is slightly different from its competitors.
C)Dole Co.faced no barrier to entry when it decided to enter its market.
D)Dole Co.is unable to collude with other firms in the market.
E)Dole Co.must pay close attention to the decisions of each of its competitors.
Free
Multiple Choice
Q 16Q 16
Which of the following goods is best described as being sold in a monopolistically competitive market?
A)batteries
B)wheat
C)fast food
D)postage stamps
E)the local newspaper
Free
Multiple Choice
Q 17Q 17
Within a monopolistically competitive industry,
A)firms can freely enter and exit,and economic profit is zero in the long run.
B)firms can freely enter and exit,and economic profit is greater than zero in the long run.
C)there are some barriers to entry and exit,and economic profit is zero in the long run.
D)there are some barriers to entry and exit,and economic profit is greater than zero in the long run.
E)firms can freely enter and exit,and economic profit is zero in the short run.
Free
Multiple Choice
Q 18Q 18
When comparing perfect competition and monopolistic competition,we find that
A)firms in monopolistic competition produce identical products just as do firms in perfect competition.
B)firms in monopolistic competition face barriers to entry,unlike firms in perfect competition.
C)advertising plays a large role in monopolistic competition,unlike in perfect competition.
D)firms in monopolistic competition are price takers just as is the case for firms in perfect competition.
E)firms in monopolistic competition each have a large market share.
Free
Multiple Choice
Q 19Q 19
Which of the following best explains why firms in monopolistic competition face a downward-sloping demand curve while perfectly competitive firms do not?
A)Monopolistically competitive industries have only a few firms.
B)Monopolistically competitive firms face barriers to entry.
C)Only industries with free entry and exit have firms that face horizontal demand curves.
D)Firms in monopolistic competition are price takers.
E)Firms in monopolistic competition sell differentiated goods.
Free
Multiple Choice
Q 20Q 20
Product differentiation exists within an industry when
A)there are no substitutes for the product.
B)the firm can sell all it wants at the given price.
C)the market is a monopoly.
D)the market is perfectly competitive.
E)there are close but not perfect substitutes for the product.
Free
Multiple Choice
Q 21Q 21
Firefox,Internet Explorer,and Google Chrome browsers are an example of
A)goods produced in perfectly competitive markets.
B)goods produced by monopolies.
C)product differentiation.
D)goods that are identical.
E)product similarity.
Free
Multiple Choice
Q 22Q 22
Use the table below to answer the following questions.
Table 13.1.1
-Refer to Table 13.1.1.The four-firm concentration ratio for taco stands is
A)15 percent.
B)100 percent.
C)80 percent.
D)33 percent.
E)30 percent.
Free
Multiple Choice
Q 23Q 23
Use the table below to answer the following questions.
Table 13.1.1
-Refer to Table 13.1.1.The four-firm concentration ratio for the pizza sellers is
A)40 percent.
B)100 percent.
C)80 percent.
D)33 percent.
E)12.5 percent.
Free
Multiple Choice
Q 24Q 24
Which one of the following statements describes a market that is monopolistically competitive?
A)There are significant barriers to entry.
B)The products produced by the firms are identical.
C)Many firms compete by making similar but slightly different products.
D)There is a small number of large firms.
E)The product produced by one firm has no close substitutes.
Free
Multiple Choice
Q 25Q 25
The four-firm concentration ratio is the percentage of the total ________ accounted for by the four largest firms in the industry.
A)profit
B)sales
C)cost
D)capital
E)investment
Free
Multiple Choice
Q 26Q 26
The purpose of calculating the concentration ratio is
A)to obtain the firm's total profit.
B)to obtain the firm's production cost.
C)to measure the losses the firm incurred.
D)to measure the extent to which the market is dominated by a small number of firms.
E)to distinguish between the firm's total profit and production cost.
Free
Multiple Choice
Q 27Q 27
In a perfectly competitive market,the four-firm concentration ratio is
A)almost zero.
B)50 percent.
C)100 percent.
D)75 percent.
E)25 percent.
Free
Multiple Choice
Q 28Q 28
In a monopoly,the four-firm concentration ratio is
A)75 percent.
B)100 percent.
C)almost zero.
D)25 percent.
E)50 percent.
Free
Multiple Choice
Q 29Q 29
A four-firm concentration ratio of less than 60 percent indicates
A)a monopoly.
B)a market that is dominated by a few firms.
C)a competitive market.
D)a market with two firms.
E)an absence of competition.
Free
Multiple Choice
Q 30Q 30
A four-firm concentration ratio that exceeds 60 percent indicates
A)a perfectly competitive market.
B)a monopolistically competitive market.
C)a monopoly.
D)a market that is highly concentrated and dominated by a few firms.
E)a competitive market.
Free
Multiple Choice
Q 31Q 31
The Herfindahl-Hirschman Index (HHI)is the square of the percentage market share of each firm summed over the ________ firms in a market.
A)largest 60
B)largest 50
C)smallest 50
D)largest 75
E)smallest 60
Free
Multiple Choice
Q 32Q 32
In a perfectly competitive market,the Herfindahl-Hirschman Index (HHI)
A)is small.
B)is usually greater than 5,000.
C)is greater than 1,000 but less than 2,000.
D)lies between 1,200 and 1,500.
E)is greater than 10,000.
Free
Multiple Choice
Q 33Q 33
A market in which the Herfindahl-Hirschman Index (HHI)lies between 1,500 and 2,500 is regarded as being
A)a monopoly.
B)concentrated and uncompetitive.
C)a perfectly competitive market.
D)competitive.
E)a potential matter of concern for regulators.
Free
Multiple Choice
Q 34Q 34
When the Herfindahl-Hirschman Index (HHI)is greater than 2,500,
A)the market is very competitive.
B)a monopoly exists.
C)there are many producers in the market.
D)the market is moderately competitive.
E)the market is uncompetitive.
Free
Multiple Choice
Q 35Q 35
An industry with a high four-firm concentration ratio may have little monopoly power if
A)its production is geographically concentrated.
B)its barriers to entry are low.
C)its barriers to entry are high.
D)there are no international producers of the product.
E)there are no close substitutes for its product.
Free
Multiple Choice
Q 36Q 36
The four-firm concentration ratio tells us the percentage of ________ for the four largest firms in an industry.
A)employment
B)accounting profit
C)economic profit
D)the value of sales
E)physical output
Free
Multiple Choice
Q 37Q 37
What is the maximum value of the Herfindahl-Hirschman Index?
A)1
B)1,000,000
C)100,000
D)10,000
E)1,000
Free
Multiple Choice
Q 38Q 38
The Herfindahl-Hirschman Index is calculated as
A)the cube of the percentage market share of each firm summed over the largest 100 firms.
B)the square of the percentage market share of each firm summed over the largest 50 firms or summed over all the firms if there are fewer than 50.
C)the square of the percentage market share of each firm summed over the largest 20 firms.
D)double the market share of the five largest firms.
E)the percentage of the total revenue accounted for by the four largest firms in the industry.
Free
Multiple Choice
Q 39Q 39
If a market is shared equally by four firms,the Herfindahl-Hirschman Index is
A)1/4.
B)4.
C)25.
D)100.
E)2,500.
Free
Multiple Choice
Q 40Q 40
The Herfindahl-Hirschman Index (HHI)for a local water supplier is
A)less than 100.
B)between 101 and 999.
C)more than 1,000 but less than 2,000.
D)10,000.
E)between 2,000 and 5,000.
Free
Multiple Choice
Q 41Q 41
If a market is shared equally by 100 firms,the Herfindahl-Hirschman Index is
A)1/100.
B)1/50.
C)1.
D)50.
E)100.
Free
Multiple Choice
Q 42Q 42
The four-firm concentration ratio in an industry is 75 percent. Total sales in the industry are $800 million and total economic profit in the industry is $500 million.Normal profit for each firm is zero.
From this information we know that
A)economic profit of any four firms is at least $667 million.
B)total sales from the four largest firms is $600 million.
C)economic profit of the four largest firms is $375 million.
D)total sales from any four firms is at least $1,067 million.
E)economic profit of the four largest firms is $500 million.
Free
Multiple Choice
Q 43Q 43
The correct ranking of the four basic market structures from low HHI (Herfindahl-Hirschman Index)to high HHI is
A)monopolistic competition,perfect competition,oligopoly,monopoly.
B)perfect competition,oligopoly,monopolistic competition,monopoly.
C)monopoly,oligopoly,monopolistic competition,perfect competition.
D)perfect competition,monopolistic competition,oligopoly,monopoly.
E)monopoly,monopolistic competition,oligopoly,perfect competition.
Free
Multiple Choice
Q 44Q 44
Use the figure below to answer the following questions. Figure 13.2.1
-Refer to Figure 13.2.1.If this firm is in monopolistic competition,it produces output
A)of 40 units.
B)of 60 units.
C)of 80 units.
D)that is less than 40 units.
E)equal to the output of competing firms.
Free
Multiple Choice
Q 45Q 45
Use the figure below to answer the following questions. Figure 13.2.1
-Refer to Figure 13.2.1.If this firm is in monopolistic competition,it charges a price of
A)$20 a unit.
B)$50 a unit.
C)$40 a unit.
D)$30 a unit.
E)$60 a unit.
Free
Multiple Choice
Q 46Q 46
Use the figure below to answer the following questions. Figure 13.2.1
-Refer to Figure 13.2.1.This firm in monopolistic competition will
A)make an economic profit in the short run.
B)make zero economic profit in the short run.
C)incur an economic loss.
D)make an economic profit in the long run.
E)incur an economic loss in the long run.
Free
Multiple Choice
Q 47Q 47
Use the figure below to answer the following questions. Figure 13.2.1
-Refer to Figure 13.2.1.If this firm in monopolistic competition is in short-run equilibrium,then
A)rival firms will enter the industry.
B)all firms will exit the industry.
C)economic profit of all firms in the industry is zero.
D)it produces 60 units of output to maximize economic profit.
E)the firm's profits can be expected to rise over time.
Free
Multiple Choice
Q 48Q 48
Use the figure below to answer the following questions. Figure 13.2.2
-Refer to Figure 13.2.2.To maximize economic profit,this firm in monopolistic competition charges a price of
A)$15 a unit.
B)$25 a unit.
C)$20 a unit.
D)$32 a unit.
E)$35 a unit.
Free
Multiple Choice
Q 49Q 49
Use the figure below to answer the following questions. Figure 13.2.2
-Refer to Figure 13.2.2.To maximize economic profit,this firm in monopolistic competition produces an output of
A)40 units.
B)70 units.
C)60 units.
D)less than 40 units.
E)80 units.
Free
Multiple Choice
Q 50Q 50
Use the figure below to answer the following questions. Figure 13.2.2
-Refer to Figure 13.2.2.This firm in monopolistic competition
A)is incurring an economic loss.
B)is in long-run equilibrium.
C)is making an economic profit.
D)must raise its price to maximize economic profit.
E)will make more economic profit in the long run.
Free
Multiple Choice
Q 51Q 51
Use the figure below to answer the following questions. Figure 13.2.3
-Refer to Figure 13.2.3.Which demand curve does this monopolistically competitive firm face in the long run?
A)demand curve D1
B)demand curve D2
C)either demand curve D1 or D2
D)neither demand curve D1 nor demand curve D2
E)Any demand curve is possible,including D1 or D2.
Free
Multiple Choice
Q 52Q 52
Use the figure below to answer the following questions. Figure 13.2.3
-Refer to Figure 13.2.3.Assume this firm faces demand curve D1.To maximize economic profit,this firm in monopolistic competition will charge a price of ________ and produce an output of ________ units.
A)$100;200
B)$90;220
C)$80;200
D)$70;100
E)$55;140
Free
Multiple Choice
Q 53Q 53
Use the figure below to answer the following questions. Figure 13.2.3
-Refer to Figure 13.2.3.Assume this firm faces demand curve D1.At the profit-maximizing output level,the firm
A)incurs an economic loss.
B)makes zero economic profit.
C)makes an economic profit.
D)makes less economic profit than that earned by firms in perfect competition.
E)makes an unknown economic profit that is impossible to determine without information concerning the price charged by the rival firms.
Free
Multiple Choice
Q 54Q 54
Use the figure below to answer the following questions. Figure 13.2.3
-Refer to Figure 13.2.3.Assume this firm faces demand curve D1.If this firm in monopolistic competition is maximizing profit,
A)there will be entry of rival firms into the industry.
B)rival firms will exit the industry.
C)the market is efficient.
D)this firm will exit the industry in the long run.
E)its profit will rise over time.
Free
Multiple Choice
Q 55Q 55
Use the figure below to answer the following questions. Figure 13.2.3
-Refer to Figure 13.2.3.Assume this firm faces demand curve D1.If the firm produced the efficient quantity,it would produce
A)100 units.
B)220 units.
C)200 units.
D)250 units.
E)140 units.
Free
Multiple Choice
Q 56Q 56
Use the figure below to answer the following questions. Figure 13.2.3
-Refer to Figure 13.2.3.Assume this firm faces demand curve D2.To maximize economic profit,this firm in monopolistic competition will charge a price of ________ and produce an output of ________ units.
A)$40;100
B)$90;220
C)$80;200
D)$55;140
E)$70;100
Free
Multiple Choice
Q 57Q 57
Use the figure below to answer the following questions. Figure 13.2.3
-Refer to Figure 13.2.3.Assume this firm faces demand curve D2.At the profit-maximizing output level,the firm
A)incurs an economic loss.
B)makes zero economic profit.
C)makes an economic profit.
D)is not in a long-run equilibrium.
E)is producing at its efficient scale.
Free
Multiple Choice
Q 58Q 58
Use the figure below to answer the following questions. Figure 13.2.3
-Refer to Figure 13.2.3.Assume this firm faces demand curve D2.If this firm in monopolistic competition is maximizing economic profit,
A)there will be entry of rival firms into the industry.
B)rival firms will exit the industry.
C)it is producing the efficient quantity.
D)the number of firms in the industry will remain constant.
E)economic profit will fall over time.
Free
Multiple Choice
Q 59Q 59
Use the figure below to answer the following questions. Figure 13.2.3
-Refer to Figure 13.2.3.Assume this firm faces demand curve D2.When the firm produces the efficient quantity,it produces
A)100 units.
B)140 units.
C)200 units.
D)220 units.
E)250 units.
Free
Multiple Choice
Q 60Q 60
Use the figure below to answer the following questions. Figure 13.2.3
-Refer to Figure 13.2.3.Assume this firm faces demand curve D2.If the firm produces the efficient quantity,it
A)makes an economic profit.
B)makes zero economic profit.
C)incurs an economic loss.
D)is in a long-run equilibrium.
E)will face competition from new firms entering the industry.
Free
Multiple Choice
Q 61Q 61
In the long run,all firms in an industry that is monopolistically competitive
A)produce at their efficient scale.
B)set price equal to marginal cost.
C)incur an economic profit.
D)make an economic profit.
E)make zero economic profit.
Free
Multiple Choice
Q 62Q 62
In the short-run,the similarity between a monopolist and a monopolistically competitive firm is that
A)they both make the same decisions about the level of output and output price.
B)they both face an upward-sloping supply curve for their products.
C)they both try to maximize their total revenues.
D)they both try to minimize their average fixed costs.
E)they set the price such that marginal revenue equals average total cost.
Free
Multiple Choice
Q 63Q 63
Mrs.Smith's bakery shop is a firm in monopolistic competition.The firm's marginal revenue curve is
A)upward sloping.
B)downward sloping and above the demand curve.
C)a horizontal line.
D)the same as the demand curve.
E)downward sloping and lies below the demand curve.
Free
Multiple Choice
Q 64Q 64
Mrs.Smith's bakery shop is a firm in monopolistic competition.She is currently selling a box of bread for $16.The firm's marginal cost is $7 and marginal revenue is $7.To maximize economic profit Mrs.Smith
A)shuts down.
B)decreases output so that marginal revenue exceeds marginal cost.
C)continues to produce the same level of output.
D)increases output so that marginal cost exceeds marginal revenue.
E)decreases output so that marginal cost equals the output price.
Free
Multiple Choice
Q 65Q 65
What will happen in the long run if firms in monopolistic competition incur economic loss?
A)Firms will continue producing and endure the losses.
B)Firms will leave the industry until the remaining firms make positive economic profit.
C)Firms will ask the government for financial aid.
D)Firms will leave the industry until the remaining firms make zero economic profit.
E)The level of investment in this industry will increase to boost the economy.
Free
Multiple Choice
Q 66Q 66
A firm has excess capacity if it
A)produces above its efficient scale.
B)produces below its efficient scale.
C)produces the same level as its efficient scale.
D)sells some of its factors of production.
E)improves the quality of its factors of production.
Free
Multiple Choice
Q 67Q 67
The real estate industry is monopolistically competitive,so in this industry
A)the market demand curve is a horizontal line.
B)the market demand curve is upward sloping.
C)there are few realtors in the market.
D)excess capacity exists.
E)excess capacity does not exist.
Free
Multiple Choice
Q 68Q 68
A firm's markup is
A)the firm's total profit.
B)the firm's total cost.
C)the amount by which price exceeds marginal cost.
D)the amount by which price exceeds average variable cost.
E)the amount by which price is less than marginal cost.
Free
Multiple Choice
Q 69Q 69
Markup
A)does not exist in monopoly.
B)does not exist in monopolistic competition.
C)exists in perfect competition.
D)is the difference between price and average total cost.
E)exists in both monopoly and monopolistic competition.
Free
Multiple Choice
Q 70Q 70
In monopolistically competitive industries,
A)firms compete on quality,price and marketing.
B)the range of choice of products is the same as in perfectly competitive industries.
C)firms are insensitive to changes in consumer demand.
D)all firms produce a quantity at which marginal cost is greater than marginal benefit.
E)all firms make an economic profit.
Free
Multiple Choice
Q 71Q 71
Excess capacity in monopolistically competitive firms occurs because
A)each firm faces a demand that is perfectly elastic.
B)each firm builds a huge plant.
C)the existence of slightly differentiated products,serving almost the same purpose,causes a waste of precious natural resources.
D)firms produce an output that is less than the output at minimum average total cost.
E)marginal cost is too high.
Free
Multiple Choice
Q 72Q 72
Use the figure below to answer the following questions. Figure 13.2.4
-Refer to Figure 13.2.4.The figure represents a monopolistically competitive firm in short-run equilibrium.What is the firm's level of output?
A)Q1
B)Q2
C)Q3
D)Q4
E)zero
Free
Multiple Choice
Q 73Q 73
Use the figure below to answer the following questions. Figure 13.2.4
-Refer to Figure 13.2.4.The figure represents a monopolistically competitive firm in short-run equilibrium.What price does the firm charge per unit?
A)P2
B)P1
C)P4
D)P3
E)P5
Free
Multiple Choice
Q 74Q 74
Use the figure below to answer the following questions. Figure 13.2.4
-Refer to Figure 13.2.4.The figure represents a monopolistically competitive firm in short-run equilibrium.In the long run,
A)new firms enter,and each existing firm's demand curve shifts leftward.
B)new firms enter,and each existing firm's demand curve shifts rightward.
C)existing firms exit,and each remaining firm's demand curve shifts leftward.
D)existing firms exit,and each remaining firm's demand curve shifts rightward.
E)the equilibrium is the same as in the short run.
Free
Multiple Choice
Q 75Q 75
In the long run,a monopolistically competitive firm produces the output at which price equals
A)marginal cost.
B)marginal revenue.
C)average variable cost.
D)average total cost.
E)average fixed cost.
Free
Multiple Choice
Q 76Q 76
Consider a monopolistically competitive industry in long-run equilibrium.Suppose there is a large increase in wages that raises the costs for all firms.What happens within each firm in the short run?
A)They will be forced to close down due to the excess costs.
B)They will continue producing as before,cushioned by their previous excess profits.
C)They will expand output and try to make up for lost profits.
D)They will lower prices and try to steal customers away from their rivals.
E)They will decrease production and produce the quantity at which marginal revenue equals the new (higher)marginal cost.
Free
Multiple Choice
Q 77Q 77
In monopolistic competition,long-run economic profit is zero because of
A)product differentiation.
B)no barriers to entry.
C)excess capacity.
D)economic inefficiency.
E)the downward-sloping demand curve facing each firm.
Free
Multiple Choice
Q 78Q 78
In the long run,a monopolistically competitive firm will make the same economic profit as
A)a monopolistically competitive firm in the short run.
B)a single-price monopoly.
C)a price-discriminating monopoly.
D)a perfectly competitive firm in long-run equilibrium.
E)a perfectly competitive firm in short-run equilibrium.
Free
Multiple Choice
Q 79Q 79
Which one of the following is true for perfect competition,monopolistic competition,and single-price monopoly?
A)Each firm produces an identical good.
B)Each firm makes zero long-run economic profit.
C)The profit maximizing quantity occurs at the quantity at which MC = MR.
D)There is easy entry and exit.
E)Demand is perfectly elastic.
Free
Multiple Choice
Q 80Q 80
In the long run,the firm in monopolistic competition
A)faces a perfectly elastic demand.
B)produces more than the quantity at minimum ATC.
C)produces less than the quantity at minimum ATC.
D)produces the quantity at minimum ATC.
E)makes an economic profit.
Free
Multiple Choice
Q 81Q 81
Which one of the following characteristics is not shared by single-price monopoly and monopolistic competition?
A)Firms face a downward-sloping demand curve.
B)Profit-maximizing quantity occurs where MC = MR.
C)Price charged is the highest consumers are willing to pay.
D)Firms make an economic profit in the long run.
E)The marginal revenue curve lies below the demand curve.
Free
Multiple Choice
Q 82Q 82
Which one of the following characteristics is shared by perfect competition and monopolistic competition?
A)Firms face a downward-sloping demand curve.
B)Profit-maximizing quantity occurs where MC = MR.
C)Long-run equilibrium price equals minimum ATC.
D)Firms make an economic profit in the long run.
E)Demand is perfectly elastic.
Free
Multiple Choice
Q 83Q 83
Which of the following are true? The similarities between perfect competition and monopolistic competition include: (1)no barriers to entry.
(2)profit-maximizing output occurs where MC = MR.
(3)long-run economic profit equals zero.
A)(1)only
B)(2)only
C)(1)and (2)only
D)(2)and (3)only
E)(1), (2),and (3)
Free
Multiple Choice
Q 84Q 84
Firms in monopolistic competition make zero economic profit in the long run because
A)their costs rise over time.
B)the demand they face decreases as rival firms offer slightly differentiated products for sale in the same market.
C)their marginal cost curves slope upward.
D)the market eventually becomes perfectly competitive.
E)the four-firm concentration ratio gradually shrinks.
Free
Multiple Choice
Q 85Q 85
Choose the correct statement about firms in monopolistic competition.
A)All firms make positive economic profit.
B)The price is set equal to marginal cost to achieve maximum economic profit.
C)Price is lower than in perfect competition.
D)Production always takes place at minimum average total cost.
E)The price is always greater than the marginal cost.
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Multiple Choice
Q 86Q 86
Choose the correct statement about firms in monopolistic competition.
A)A firm must lower its price to sell a greater quantity.
B)A firm can never incur an economic loss.
C)Price is never more than marginal cost.
D)Firms offer identical products.
E)The most a firm can make is zero economic profit.
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Multiple Choice
Q 87Q 87
For a monopolistically competitive firm to be making an economic profit,
A)the production period must be the short run.
B)the production period must be the long run.
C)rival firms must not exist.
D)its rivals must also be making an economic profit.
E)barriers to entry must exist.
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Multiple Choice
Q 88Q 88
When firms in monopolistic competition incur an economic loss,
A)firms enter the industry and produce better products.
B)firms exit the industry,and demand increases for the products of the firms that remain.
C)firms exit the industry,and demand decreases for the firms that remain in the industry.
D)firms enter the industry,and demand increases for the firms that were originally in the industry.
E)the industry will eventually disappear.
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Multiple Choice
Q 89Q 89
When firms in monopolistic competition make an economic profit,
A)firms enter the industry,which increases demand for the product of the firms originally in the market.
B)firms exit the industry,and demand increases for the products of the firms that remain.
C)firms exit the industry,and demand decreases for the firms that remain in the industry.
D)firms enter the industry,and demand decreases for the firms that were originally in the industry.
E)eventually the market will become a monopoly.
Free
Multiple Choice
Q 90Q 90
Firms in monopolistic competition have rivals that
A)will always match their price increases.
B)will always match their price decreases but not their price increases.
C)all agree on a common price.
D)set their price where the demand curve is tangent to the average cost curve.
E)set their price according to the demand they face.
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Multiple Choice
Q 91Q 91
For a firm in monopolistic competition,the marginal cost curve intersects the average total cost curve
A)at the minimum average total cost.
B)to the left of the minimum average total cost.
C)to the right of the minimum average total cost.
D)at no point.
E)at the same quantity at which the marginal cost curve intersects the marginal revenue curve.
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Multiple Choice
Q 92Q 92
Which of the following is always true regarding a profit-maximizing monopolistically competitive firm in short-run equilibrium?
A)P = ATC
B)P = MR
C)MR = MC
D)MC = ATC
E)P = MC
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Multiple Choice
Q 93Q 93
Use the figure below to answer the following questions. Figure 13.2.5
-Refer to Figure 13.2.5 The figure shows the situation facing Smart Digit,Inc. ,a firm in monopolistic competition that produces calculators.What is the firm's economic profit per day?
A)zero
B)between $1 and $700
C)between $701 and $900
D)more than $901
E)less than zero
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Multiple Choice
Q 94Q 94
Use the figure below to answer the following questions. Figure 13.2.5
-Refer to Figure 13.2.5.The figure shows the situation facing Smart Digit,Inc. ,a firm in monopolistic competition that produces calculators.The firm's markup is ________ per calculator.
A)zero
B)$2
C)$4
D)$6
E)$10
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Multiple Choice
Q 95Q 95
Use the figure below to answer the following questions. Figure 13.2.6
-Refer to Figure 13.2.6,which shows the demand curve,marginal revenue curve and cost curves faced by Gap.Gap maximizes its economic profit if it sells ________ jackets per day.
A)200
B)240
C)275
D)140
E)280
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Multiple Choice
Q 96Q 96
Use the figure below to answer the following questions. Figure 13.2.6
-Refer to Figure 13.2.6,which shows the demand curve,marginal revenue curve and cost curves faced by Gap.Gap maximizes its economic profit if it charges ________ per jacket.
A)$100
B)$95
C)$75
D)$120
E)$90
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Multiple Choice
Q 97Q 97
Use the figure below to answer the following questions. Figure 13.2.6
-Refer to Figure 13.2.6,which shows the demand curve,marginal revenue curve and cost curves faced by Gap.Gap's economic ________ is ________ a day.
A)loss;$8,000
B)loss;$13,000
C)profit;$7,200
D)profit;$13,000
E)loss;$8,960
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Multiple Choice
Q 98Q 98
Consider a monopolistically competitive industry which is in long-run equilibrium.Which of the following is true?
A)All firms charge a price equal to average total cost.
B)All firms charge a price equal to marginal cost.
C)All firms make an economic profit.
D)The demand,average total cost,and marginal cost curves all intersect at the same point.
E)Firms have an incentive to enter the industry.
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Multiple Choice
Q 99Q 99
In the long-run,a firm in monopolistic competition produces at an output level where
A)P > ATC and MR = MC.
B)P > ATC and MR > MC.
C)P = ATC and MR = MC.
D)P = ATC and MR > MC.
E)P > ATC and MC > ATC.
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Multiple Choice
Q 100Q 100
Use the figure below to answer the following question. Figure 13.2.7
-Refer to Figure 13.2.7.The figure shows the demand,marginal revenue,and cost curves for a monopolistically competitive firm in the long run.The firm has excess capacity of
A)4 units.
B)8 units.
C)16 units.
D)$10.
E)$5.
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Multiple Choice
Q 101Q 101
Monopolistic competition might be efficient if
A)firms invested in technology that decreased the marginal cost of production.
B)more firms entered the industry.
C)firms left the industry.
D)the loss that arises because the quantity produced is less than the efficient quantity is offset by the gain that arises from having a greater degree of product variety.
E)firms made more use of brand names.
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Multiple Choice
Q 102Q 102
A firm's efficient scale is the quantity at which ________ is a minimum. A firm has excess capacity if it produces ________ its efficient scale.
A)average total cost;below
B)marginal cost;above
C)average total cost;above
D)marginal cost;below
E)average variable cost;below
Free
Multiple Choice
Q 103Q 103
Use the table below to answer the following question.
Table 13.2.1
-Refer to Table 13.2.1.Sara is a dot.com entrepreneur who sells sweatshirts.She pays $1,000 a week for her Web server and Internet connection.She pays the firm that makes the sweatshirts $20 a sweatshirt.Sara has no other costs.The table sets out the demand schedule for Sara's sweatshirts.Other firms ________ enter the Web sweatshirt business and compete with Sara.In the long run,the demand for Sara's sweatshirts ________ and her economic profit ________.
A)will;decreases;falls to zero
B)will not;decreases;falls to zero
C)will;increases;increases
D)will not;increases;increases
E)will;increases;falls to zero
Free
Multiple Choice
Q 104Q 104
Firms in monopolistic competition in the short run always
A)set price above marginal cost.
B)make an economic profit.
C)set price equal to marginal cost.
D)produce at the minimum average total cost.
E)break even.
Free
Multiple Choice
Q 105Q 105
The profit-maximizing condition for a firm in monopolistic competition is to produce the quantity at which
A)marginal cost equals price.
B)price equals marginal revenue.
C)average total cost equals price.
D)marginal cost equals marginal revenue.
E)average variable cost equals price.
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Multiple Choice
Q 106Q 106
In monopolistic competition,firms can make an economic profit in
A)the short run but not in the long run.
B)the short run and in the long run.
C)the long run but not in the short run.
D)neither the short run nor the long run.
E)always in the short run and sometimes but not frequently in the long run.
Free
Multiple Choice
Q 107Q 107
In long-run equilibrium,a firm in monopolistic competition
A)makes zero economic profit and operates with excess capacity.
B)makes zero economic profit and produces above capacity output.
C)makes a positive economic profit and operates with excess capacity.
D)makes a positive economic profit and produces above capacity output.
E)incurs an economic loss and exits the market.
Free
Multiple Choice
Q 108Q 108
A monopolistically competitive firm has excess capacity because in the
A)long run,average total cost exceeds minimum average total cost.
B)short run,marginal revenue exceeds marginal cost.
C)long run,it makes an economic profit.
D)short run,average total cost is less than average variable cost.
E)long run,average total cost is less than average variable cost.
Free
Multiple Choice
Q 109Q 109
Which of the following statements regarding monopolistic competition is FALSE?
A)Resources are used efficiently when marginal social benefit equals marginal social cost.
B)A greater degree of product variety creates a loss because the quantity produced is less than the efficient quantity.
C)Monopolistic competition is definitely inefficient because price exceeds marginal cost.
D)Compared to a situation with total product uniformity,monopolist competition might be efficient.
E)A firm in monopolistic competition produces a quantity that is less than the efficient scale.
Free
Multiple Choice
Q 110Q 110
An advantage of monopolistic competition over perfect competition is
A)economic profit.
B)product variety.
C)excess capacity.
D)efficiency.
E)economies of scale.
Free
Multiple Choice
Q 111Q 111
Because consumers value product variety,
A)the demand for goods in monopolistic competition is perfectly elastic.
B)the inefficiency of monopolistic competition is partially offset.
C)in the long run,monopolistic competition firms make economic profit.
D)monopolistically competitive industries are efficient.
E)no two goods of the same type will have equal prices.
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Multiple Choice
Q 112Q 112
Selling costs
A)are variable costs that increase total cost.
B)always increase demand for a firm's product.
C)always decrease demand by increasing competition.
D)always provide consumers with valuable services.
E)include marketing expenditures on advertising and packaging.
Free
Multiple Choice
Q 113Q 113
Advertising by firms in monopolistic competition
A)does not provide consumers with useful information.
B)increases the marginal cost of production.
C)is inefficient.
D)is a waste of valuable resources because firms are forced by the entry of rival firms to be price takers.
E)generates the perception among consumers that product differentiation exists.
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Multiple Choice
Q 114Q 114
The decision to undertake product development in monopolistic competition is made by comparing the
A)marginal benefit of product development to the marginal cost of product development.
B)marginal revenue of product development to the average total cost of product development.
C)total revenue of product development to the total cost of product development.
D)firm's expenditure on product development to expenditures by competing firms.
E)total benefit of product development to the total cost of advertising.
Free
Multiple Choice
Q 115Q 115
In monopolistic competition,advertising costs
A)are variable costs.
B)can result in the firm producing an amount of output such that its average total cost is lower than if it did not advertise.
C)shift the ATC curve downward.
D)shift the AVC curve upward.
E)shift the MC curve upward.
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Multiple Choice
Q 116Q 116
Advertising costs in monopolistic competition increase a firm's
A)total fixed cost.
B)marginal cost.
C)total variable cost.
D)average variable cost.
E)marginal revenue.
Free
Multiple Choice
Q 117Q 117
If a firm spends $600 on advertising,its
A)ATC and MC curves shift upward.
B)MC curve shifts upward and its ATC curve does not shift.
C)ATC curve shifts upward and its MC curve does not shift.
D)ATC curve shifts upward and its MC curve shifts downward.
E)AFC and AVC curves shift upward.
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Multiple Choice
Q 118Q 118
Advertising costs are ________ costs and the per unit cost of advertising ________ as production increases.
A)fixed;increases
B)variable;increases
C)fixed;decreases
D)variable;does not change
E)variable;decreases
Free
Multiple Choice
Q 119Q 119
Expenditures on advertising
A)can lower average total cost if the advertising increases the quantity sold by a large enough amount.
B)cannot lower average total cost because when a firm advertises it increases its costs.
C)always lower average total cost because whenever a firm advertises,it increases the quantity sold.
D)are variable costs so do not affect the average total cost.
E)lower total cost if the advertising increases the quantity sold by a large enough amount.
Free
Multiple Choice
Q 120Q 120
Advertising costs of a monopolistically competitive firm are
A)greater than a monopoly and the same as a perfectly competitive firm.
B)greater than a perfectly competitive firm.
C)less than a perfectly competitive firm.
D)the same as a monopoly.
E)less than a monopoly.
Free
Multiple Choice
Q 121Q 121
A textbook publisher is in monopolistic competition.If the firm spends nothing on advertising,it can sell no books at $100 a book,but for each $10 cut in price,the quantity of books it can sell increases by 20 books a day.The firm's total fixed cost is $2,400 a day.Its average variable cost and marginal cost is a constant $20 per book.If the firm spends $1,200 a day on advertising,it can increase the quantity of books sold at each price by 50 percent.If the publisher advertises,its profit maximizing level of output is
A)120 books per day.
B)80 books per day.
C)160 books per day.
D)100 books per day.
E)240 books per day.
Free
Multiple Choice
Q 122Q 122
A textbook publisher is in monopolistic competition.If the firm spends nothing on advertising,it can sell no books at $100 a book,but for each $10 cut in price,the quantity of books it can sell increases by 20 books a day.The firm's total fixed cost is $2,400 a day.Its average variable cost and marginal cost is a constant $20 per book.If the firm spends $1,200 a day on advertising,it can increase the quantity of books sold at each price by 50 percent.If the publisher advertises,its profit maximizing price per book is
A)$40.
B)$50.
C)$60.
D)$70.
E)$20.
Free
Multiple Choice
Q 123Q 123
Use the information below to answer the following question.
Fact 13.3.1
Suppose that at one of the Talbots shops,marginal cost of a coat is constant at $150,and total fixed cost is $3,000 a day.The shop maximizes its profit by selling 15 coats a day at $500 per coat.Then the shops nearby increase their advertising.The Talbots shop responds by spending $1,500 a day more on advertising its coats.As a result,its profit-maximizing number of coats sold increases to 25 a day at $400 per coat.
-Refer to Fact 13.3.1.As a result of increased advertising,Talbots' markup
A)decreases by $100.
B)increases by $50.
C)increases by $75.
D)decreases by $60.
E)decreases by an unknown amount.
Free
Multiple Choice
Q 124Q 124
Product development is efficient if the marginal social cost of a new and improved product ________ its marginal social benefit. In monopolistic competition marginal revenue is less than price,so product development is probably ________ to its efficient level.
A)is greater than;not pushed
B)equals;pushed
C)is greater than;pushed
D)equals;not pushed
E)is less than;not pushed
Free
Multiple Choice
Q 125Q 125
Advertising and brand names
A)are never efficient.
B)can be efficient but are not always efficient.
C)are equally efficient in monopolistically competitive markets and perfectly competitive markets.
D)are always efficient.
E)are more efficient in perfectly competitive markets than in monopolistically competitive markets.
Free
Multiple Choice
Q 126Q 126
Use the information below to answer the following questions.
Fact 13.3.2
Suppose that Tommy Hilfiger's marginal cost of a jacket is $100 (a constant marginal cost)and at one of the firm's shops,total fixed cost is $2,000 a day.The profit-maximizing number of jackets sold in this shop is 20 a day.Then the shops nearby start to advertise their jackets.The Tommy Hilfiger shop now spends $2,000 a day advertising its jackets,and its profit-maximizing number of jackets sold jumps to 50 a day.
-Refer to Fact.13.3.2.If advertising decreases demand and makes demand more elastic,the price of a Tommy Hilfiger jacket ________.If advertising increases demand and makes demand less elastic,the price of a Tommy Hilfiger jacket ________.
A)falls;does not change
B)rises;falls
C)falls;rises
D)rises;does not change
E)does not change;does not change
Free
Multiple Choice
Q 127Q 127
Use the information below to answer the following questions.
Fact 13.3.2
Suppose that Tommy Hilfiger's marginal cost of a jacket is $100 (a constant marginal cost)and at one of the firm's shops,total fixed cost is $2,000 a day.The profit-maximizing number of jackets sold in this shop is 20 a day.Then the shops nearby start to advertise their jackets.The Tommy Hilfiger shop now spends $2,000 a day advertising its jackets,and its profit-maximizing number of jackets sold jumps to 50 a day.
-Refer to Fact 13.3.2.Tommy Hilfiger uses advertising as a signal because
A)when Tommy Hilfiger advertises,it forces its competitors to advertise,which raises the competition's average total cost and increases the possibility of the competition incurring an economic loss and leaving the market.
B)only firms that can afford advertising have longevity and will be able to honour any future obligations to its customers.
C)by spending large sums of advertising Tommy Hilfiger is signalling that its jackets are high quality.
D)advertising encourages people to spend regardless of the quality.
E)advertising always increases demand and creates a more efficient market.
Free
Multiple Choice
Q 128Q 128
Use the information below to answer the following questions.
Fact 13.3.2
Suppose that Tommy Hilfiger's marginal cost of a jacket is $100 (a constant marginal cost)and at one of the firm's shops,total fixed cost is $2,000 a day.The profit-maximizing number of jackets sold in this shop is 20 a day.Then the shops nearby start to advertise their jackets.The Tommy Hilfiger shop now spends $2,000 a day advertising its jackets,and its profit-maximizing number of jackets sold jumps to 50 a day.
-Refer to Fact 13.3.2.Having a brand name helps Tommy Hilfiger increase its economic profit because
A)the goal of a brand name is to encourage people to buy just one good.After the initial purchases,Tommy Hilfiger can decrease quality and produce goods at a lower average total cost,which increases economic profit.
B)in every type of market,consumers are most comfortable when buying from a firm with a well-known brand name.And the greater the number of consumers,the greater is the economic profit.
C)a brand name provides an incentive to achieve high and consistent quality,and consumers will purchase goods from Tommy Hilfiger rather than from an unknown producer because they know what to expect from Tommy Hilfiger.
D)having a brand name usually leads to a monopoly.
E)having a brand name lowers total variable cost.
Free
Multiple Choice
Q 129Q 129
Calvin is a custom picture framer.His total fixed cost is $110 a day,and his average variable cost is $1 a frame.He is maximizing his profit by selling 22 picture frames a day for $6 a frame.Few people know about Calvin's Framery.Calvin thinks that if he spends $10 a day on advertising,he can increase his market and sell 44 picture frames a day for $6 a frame.If Calvin's belief about the effect of advertising is correct,he
A)cannot increase his economic profit by advertising because advertising increases his average total cost.
B)cannot increase his economic profit by advertising because advertising increases his total cost.
C)can increase his economic profit by advertising.
D)can increase his economic profit by advertising only if he raises the price of a picture frame.
E)can increase his economic profit by advertising only if he can lower his total variable cost.
Free
Multiple Choice
Q 130Q 130
Firms in monopolistic competition constantly develop new products in an effort to
A)increase the demand for their product.
B)make the demand for their product unit elastic.
C)increase the marginal cost of their product.
D)decrease average total cost.
E)decrease average fixed cost.
Free
Multiple Choice
Q 131Q 131
Excess capacity and high advertising expenditures are encountered in
A)monopoly.
B)oligopoly.
C)monopolistic competition.
D)perfect competition.
E)all markets.
Free
Multiple Choice
Q 132Q 132
Monopolistically competitive firms engaging in advertising will definitely achieve which of the following?
A)an increase in demand
B)an increase in average total cost
C)an increase in total cost
D)Both B and C are correct.
E)A,B,and C are correct.
Free
Multiple Choice
Q 133Q 133
Use the information below to answer the following questions.
Fact 13.3.3
Suppose that Roots' marginal cost of a jacket is a constant $125.00 and the total fixed cost at one of its stores is $1,500 a day.This store sells 20 jackets a day,which is its profit-maximizing number of jackets.Then the stores nearby start to advertise their jackets.The Roots store now spends $2,000 a day advertising its jackets,and its profit-maximizing number of jackets sold jumps to 70 a day.
-Refer to Fact 13.3.3.Before the advertising begins,the average total cost of a jacket sold in this store is
A)$200.00.
B)$175.00.
C)$150.00.
D)$125.00.
E)$100.00.
Free
Multiple Choice
Q 134Q 134
Use the information below to answer the following questions.
Fact 13.3.3
Suppose that Roots' marginal cost of a jacket is a constant $125.00 and the total fixed cost at one of its stores is $1,500 a day.This store sells 20 jackets a day,which is its profit-maximizing number of jackets.Then the stores nearby start to advertise their jackets.The Roots store now spends $2,000 a day advertising its jackets,and its profit-maximizing number of jackets sold jumps to 70 a day.
-Refer to Fact 13.3.3.After the advertising begins,the average total cost of a jacket sold in this store is
A)$200.00.
B)$175.00.
C)$150.00.
D)$125.00.
E)$100.00.
Free
Multiple Choice
Q 135Q 135
Use the information below to answer the following questions.
Fact 13.3.3
Suppose that Roots' marginal cost of a jacket is a constant $125.00 and the total fixed cost at one of its stores is $1,500 a day.This store sells 20 jackets a day,which is its profit-maximizing number of jackets.Then the stores nearby start to advertise their jackets.The Roots store now spends $2,000 a day advertising its jackets,and its profit-maximizing number of jackets sold jumps to 70 a day.
-Refer to Fact 13.3.3.If the nearby firms' advertising decreases the demand for Roots' jackets and makes the demand more elastic,the price of a Roots' jacket ________.If Roots' advertising increases the demand for Roots' jackets and makes the demand less elastic,the price of a Roots' jacket ________.
A)falls;rises
B)rises;rises
C)rises;falls
D)falls;falls
E)does not change;does not change
Free
Multiple Choice
Q 136Q 136
Use the information below to answer the following questions.
Fact 13.3.3
Suppose that Roots' marginal cost of a jacket is a constant $125.00 and the total fixed cost at one of its stores is $1,500 a day.This store sells 20 jackets a day,which is its profit-maximizing number of jackets.Then the stores nearby start to advertise their jackets.The Roots store now spends $2,000 a day advertising its jackets,and its profit-maximizing number of jackets sold jumps to 70 a day.
-Refer to Fact 13.3.3.In the long run,Roots' economic profit is
A)positive.
B)negative.
C)zero.
D)greater than the economic profit of its competitors.
E)less than the economic profit of its competitors.
Free
Multiple Choice