Question 1

For allocative efficiency to hold

Accepted Answer

A)   price must equal marginal revenue of the last unit sold.
B)   price must equal the marginal cost of the last unit produced.
C)   the average variable cost must be minimized in production.
D)   the average total cost must be minimized in production.

Question 2

In the long-run equilibrium, both the perfectly competitive firm and the monopolistically competitive firm produce the output at which MR=MC and charge a price equal to the average total cost of production.

Accepted Answer

A) True 
 B)False

Question 3

For a monopolistically competitive firm, price equals average revenue.

Accepted Answer

A) True 
 B)False

Question 4

Arturo runs a Taco Bell franchise. He is selling 250 Gordita Supremes per week at a price of $2.75. If he lowers the price to $2.70, he will sell 251 Gordita Supremes. What is the marginal revenue of the 251st Gordita Supreme? If selling the extra Gordita Supreme adds $0.20 to Arturo's costs, what will be the effect on his profit from selling 251 Gordita Supremes instead of 250?

Accepted Answer

The marginal revenue of the 251st Gordit...

Question 5

When a credit card company offers different services with its card, like travel insurance for air travel tickets purchased with the credit card or product insurance for items purchased with the card, the credit card company is trying to

Accepted Answer

A)   create a barrier to entry for competing firms.
B)   create a perfectly competitive market in which to sell its credit card.
C)   convince customers that its card has greater value than those offered by rival firms.
D)   shift the demand curve for competing firms to the right.

Question 6

Monopolistically competitive firms have downward-sloping demand curves. In the long run, monopolistically competitive firms earn zero economic profits. These two characteristics imply that in the long run

Accepted Answer

A)   monopolistically competitive markets achieve productive efficiency.
B)   monopolistically competitive markets achieve allocative efficiency.
C)   monopolistically competitive firms earn economic profits.
D)   monopolistically competitive firms have excess capacity.

Question 7

Every firm that has the ability to affect the price of the good or service it sells will

Accepted Answer

A)   have a perfectly elastic demand curve.
B)   have a marginal revenue curve that lies below its demand curve.
C)   earn a short-run profit but break even in the long run.
D)   shut down in the short run.

Question 8

A monopolistically competitive firm can convince buyers that its product has value by differentiating its product to suit consumers' preferences.

Accepted Answer

A) True 
 B)False

Question 9

Figure 13-12  Figure 13-12 shows short-run cost and demand curves for a monopolistically competitive firm in the market for designer watches.
-Refer to Figure 13-12. If the diagram represents a typical firm in the designer watch market, what is likely to happen in the long run?

Accepted Answer

A)   Some firms will exit the market causing the demand to increase for firms remaining in the market.
B)   The firms that are making losses will be purchased by their more successful rivals.
C)   Inefficient firms will exit the market and new cost-efficient firms will enter the market.
D)   Firms will have to raise their prices to cover costs of production.

Question 10

Of the factors that are within the control of the firms owners, the most important factors that make a firm successful are

Accepted Answer

A)   the establishment of trademarks for its products and the aggressive defense of those trademarks.
B)   lobbying government to erect or enforce entry barriers in its markets and the marketing of its products as widely as possible.
C)   the differentiation of its products and the production of products at a lower average cost than competing firms.
D)   the selection of the prices of its products and the selection of the most productive and loyal employees.

Question 11

A monopolistically competitive firm will

Accepted Answer

A)   charge the same price as its competitors do.
B)   always produce at the minimum efficient scale of production.
C)   have some control over its price because its product is differentiated.
D)   produce an output level that is productively and allocatively efficient.

Question 12

Figure 13-11 
-Refer to Figure 13-11. The firm represented in the diagram

Accepted Answer

A)   makes zero economic profit.
B)   makes zero accounting profit.
C)   should exit the industry.
D)   should expand its output to take advantage of economies of scale.

Question 13

Table 13-3
  Table 13-3 shows the demand and cost schedules for a monopolistically competitive firm.
-Refer to Table 13-3. What is the best course of action for the firm in the short run?

Accepted Answer

A)   It should shut down.
B)   It should stay in business because it covers some of its fixed cost.
C)   It should increase its sales by lowering its price.
D)   It should not cut its price but it should increase its sales by advertising.

Question 14

Nike has used Michael Jordan to create the impression that Air Jordan basketball shoes are superior to any other basketball shoes. Nike is attempting to

Accepted Answer

A)   differentiate Air Jordan basketball shoes from other types of basketball shoes.
B)   lower the marginal cost of producing Air Jordan basketball shoes.
C)   increase its profit by raising the price of Air Jordan basketball shoes.
D)   convince consumers that Air Jordan basketball shoes are no different from other basketball shoes favored by celebrities.

Question 15

Table 13-3
  Table 13-3 shows the demand and cost schedules for a monopolistically competitive firm.
-Refer to Table 13-3. What are the profit-maximizing/loss-minimizing output level and price?

Accepted Answer

A)   Q = 0 (firm should not produce) 
B)   Q = 3; P = $18
C)   Q = 4; P = $17
D)   Q = 5; P = $16

Question 16

A successful trademark is one that becomes a generic name for a product, for example, "Kleenex" has become a generic term for tissues.

Accepted Answer

A) True 
 B)False

Question 17

Which of the following is an example of a factor that a firm's owners and managers can control in making the firm successful?

Accepted Answer

A)   the ability to produce the product at a lower cost
B)   changing consumer tastes
C)   a rise in the price of a key input, for example, a rise in the price of oil leads to higher energy costs
D)   the number of competitors in the market

Question 18

Consumers in a monopolistically competitive market do not receive any consumer surplus because the price paid for the product exceeds the marginal cost of production.

Accepted Answer

A) True 
 B)False

Question 19

Table 13-2
  Eco Energy is a monopolistically competitive producer of a sports beverage called Power On. Table 13-2 shows the firm's demand and cost schedules.
-Refer to Table 13-2. How much additional profit will be made if the firm chooses to produce and sell 5 cases instead of 4 cases?

Accepted Answer

A)   $275
B)   $145
C)   $35
D)   $20

Question 20

Table 13-1
 
-Refer to Table 13-1. The Table shows

Accepted Answer

A)   an elastic segment of the demand schedule.
B)   an inelastic segment of the demand schedule.
C)   a demand schedule with an elastic segment from $7.50 to $6.50 followed by an inelastic segment.
D)   a demand schedule with an inelastic segment from $7.50 to $6.50 followed by an elastic segment.

Exam 13: Monopolistic Competition: the Competitive Model in a More Realistic Setting

Consumers in a monopolistically competitive market do not receive any consumer surplus because the price paid for the product exceeds the marginal cost of production.

Correct Answer
verified

In the long-run equilibrium, both the perfectly competitive firm and the monopolistically competitive firm produce the output at which MR=MC and charge a price equal to the average total cost of production.

Correct Answer
verified

Table 13-1 -Refer to Table 13-1. The Table shows

Correct Answer
verified

Figure 13-12 Figure 13-12 shows short-run cost and demand curves for a monopolistically competitive firm in the market for designer watches. -Refer to Figure 13-12. If the diagram represents a typical firm in the designer watch market, what is likely to happen in the long run?

Correct Answer
verified

Nike has used Michael Jordan to create the impression that Air Jordan basketball shoes are superior to any other basketball shoes. Nike is attempting to

Correct Answer
verified

A monopolistically competitive firm can convince buyers that its product has value by differentiating its product to suit consumers' preferences.

Correct Answer
verified

Monopolistically competitive firms have downward-sloping demand curves. In the long run, monopolistically competitive firms earn zero economic profits. These two characteristics imply that in the long run

Correct Answer
verified

Every firm that has the ability to affect the price of the good or service it sells will

Correct Answer
verified

Table 13-2 Eco Energy is a monopolistically competitive producer of a sports beverage called Power On. Table 13-2 shows the firm's demand and cost schedules. -Refer to Table 13-2. How much additional profit will be made if the firm chooses to produce and sell 5 cases instead of 4 cases?

Correct Answer
verified

Of the factors that are within the control of the firms owners, the most important factors that make a firm successful are

Correct Answer
verified

Figure 13-11 -Refer to Figure 13-11. The firm represented in the diagram

Correct Answer
verified

Table 13-3 Table 13-3 shows the demand and cost schedules for a monopolistically competitive firm. -Refer to Table 13-3. What is the best course of action for the firm in the short run?

Correct Answer
verified

For a monopolistically competitive firm, price equals average revenue.

Correct Answer
verified

A successful trademark is one that becomes a generic name for a product, for example, "Kleenex" has become a generic term for tissues.

Correct Answer
verified

Which of the following is an example of a factor that a firm's owners and managers can control in making the firm successful?

Correct Answer
verified

For allocative efficiency to hold

Correct Answer
verified

A monopolistically competitive firm will

Correct Answer
verified

Correct Answer
verified
The marginal revenue of the 251st Gordit...
View Answer

Table 13-3 Table 13-3 shows the demand and cost schedules for a monopolistically competitive firm. -Refer to Table 13-3. What are the profit-maximizing/loss-minimizing output level and price?

Correct Answer
verified

When a credit card company offers different services with its card, like travel insurance for air travel tickets purchased with the credit card or product insurance for items purchased with the card, the credit card company is trying to

Correct Answer
verified

Exam 13: Monopolistic Competition: the Competitive Model in a More Realistic Setting

Consumers in a monopolistically competitive market do not receive any consumer surplus because the price paid for the product exceeds the marginal cost of production.

Correct AnswerverifiedShow Answer

In the long-run equilibrium, both the perfectly competitive firm and the monopolistically competitive firm produce the output at which MR=MC and charge a price equal to the average total cost of production.

Correct AnswerverifiedShow Answer

Table 13-1 -Refer to Table 13-1. The Table shows

Correct AnswerverifiedShow Answer

Figure 13-12 Figure 13-12 shows short-run cost and demand curves for a monopolistically competitive firm in the market for designer watches. -Refer to Figure 13-12. If the diagram represents a typical firm in the designer watch market, what is likely to happen in the long run?

Correct AnswerverifiedShow Answer

Nike has used Michael Jordan to create the impression that Air Jordan basketball shoes are superior to any other basketball shoes. Nike is attempting to

Correct AnswerverifiedShow Answer

A monopolistically competitive firm can convince buyers that its product has value by differentiating its product to suit consumers' preferences.

Correct AnswerverifiedShow Answer

Monopolistically competitive firms have downward-sloping demand curves. In the long run, monopolistically competitive firms earn zero economic profits. These two characteristics imply that in the long run

Correct AnswerverifiedShow Answer

Every firm that has the ability to affect the price of the good or service it sells will

Correct AnswerverifiedShow Answer

Table 13-2 Eco Energy is a monopolistically competitive producer of a sports beverage called Power On. Table 13-2 shows the firm's demand and cost schedules. -Refer to Table 13-2. How much additional profit will be made if the firm chooses to produce and sell 5 cases instead of 4 cases?

Correct AnswerverifiedShow Answer

Of the factors that are within the control of the firms owners, the most important factors that make a firm successful are

Correct AnswerverifiedShow Answer

Figure 13-11 -Refer to Figure 13-11. The firm represented in the diagram

Correct AnswerverifiedShow Answer

Table 13-3 Table 13-3 shows the demand and cost schedules for a monopolistically competitive firm. -Refer to Table 13-3. What is the best course of action for the firm in the short run?

Correct AnswerverifiedShow Answer

For a monopolistically competitive firm, price equals average revenue.

Correct AnswerverifiedShow Answer

A successful trademark is one that becomes a generic name for a product, for example, "Kleenex" has become a generic term for tissues.

Correct AnswerverifiedShow Answer

Which of the following is an example of a factor that a firm's owners and managers can control in making the firm successful?

Correct AnswerverifiedShow Answer

For allocative efficiency to hold

Correct AnswerverifiedShow Answer

A monopolistically competitive firm will

Correct AnswerverifiedShow Answer

Correct AnswerverifiedThe marginal revenue of the 251st Gordit...View AnswerShow Answer

Table 13-3 Table 13-3 shows the demand and cost schedules for a monopolistically competitive firm. -Refer to Table 13-3. What are the profit-maximizing/loss-minimizing output level and price?

Correct AnswerverifiedShow Answer

When a credit card company offers different services with its card, like travel insurance for air travel tickets purchased with the credit card or product insurance for items purchased with the card, the credit card company is trying to

Correct AnswerverifiedShow Answer

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The marginal revenue of the 251st Gordit...
View Answer

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Correct Answer
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