Question 1

Scenario: Monopolistically Competitive Firm A monopolistically competitive firm's demand for its product is equal to Q = 160 - P, and its MC curve is equal to MC = 20 + 2Q.Its TC curve is as follows: TC = 20Q + Q₂ + 20.
(Scenario: Monopolistically Competitive Firm)  Given the information in the scenario Monopolistically Competitive Firm, what is the profit-maximizing price for this firm?

Accepted Answer

A)  $160
B)  $125
C)  $40
D)  $180

Question 2

The restaurant industry is characterized by excess capacity.This means that:

Accepted Answer

A)  restaurants are producing more than their profit-maximizing level.
B)  the profit-maximizing level is less than the level that minimizes average total costs.
C)  the restaurants are producing less than their profit-maximizing level.
D)  the quantity of restaurant meals supplied exceeds the quantity of restaurant meals demanded.

Question 3

A monopolistically competitive firm is limited in the price it can set by the competition it faces from other existing and potential firms that produce close substitutes.False

Accepted Answer

A) True 
 B)False

Question 4

Figure: Monopolistic Competition IV   (Figure: Monopolistic Competition IV)  The monopolistic competitor in the figure Monopolistic Competition IV is producing at the output level that maximizes profits (minimizes losses) .The shaded rectangle depicts the level of:

Accepted Answer

A)  profit.
B)  loss.
C)  fixed cost.
D)  variable cost.

Question 5

Figure: The Restaurant Market   (Figure: The Restaurant Market)  The figure The Restaurant Market shows curves facing a typical restaurant in a community.Assume that many firms, differentiated products, and easy entry and easy exit characterize the restaurant market.The restaurant shown here will maximize profits at quantity:

Accepted Answer

A)  Q₁.
B)  Q₂.
C)  Q₃.
D)  Not enough information is given to answer the question.

Question 6

Why are some consumers willing to pay more for a bottle of Advil than they are willing to pay for a bottle of ibuprofen tablets, when ibuprofen is the pain-relieving ingredient found in Advil?

Accepted Answer

Advil is a successful brand name that se...

Question 7

Since a monopolistically competitive firm faces a downward-sloping demand curve for its product, its price will be:

Accepted Answer

A)  equal to marginal revenue.
B)  less than marginal revenue.
C)  greater than marginal revenue.
D)  equal to total revenue.

Question 8

The _________ demand curve for a firm operating in a monopolistically competitive market _.

Accepted Answer

A)  downward-sloping; is the same as the demand curve facing a perfectly competitive firm.
B)  downward-sloping; differs from the horizontal demand curve facing a perfectly competitive firm.
C)  horizontal; differs from the downward-sloping demand curve facing a perfectly competitive firm.
D)  horizontal; is the same as the demand curve facing a perfectly competitive firm.

Question 9

Monopolistically competitive firms:

Accepted Answer

A)  engage in collusive activity in order to maximize profit.
B)  are very similar to perfect competitors in producing at the minimum ATC.
C)  earn a positive economic profit if price is greater than ATC.
D)  will set price where MC > MR.

Question 10

Figure: Monopolistic Competition II   (Figure: Monopolistic Competition II)  Which of the panels in the figure Monopolistic Competition II shows a monopolistic competitor earning a profit in the short run?

Accepted Answer

A)  panel a
B)  panel b
C)  panel c
D)  panels a and c A

Question 11

A gas station operates in a monopolistically competitive market and is in short-run equilibrium.Suppose that a fixed cost for this firm decreases.As a result, the firm's price will ________, the firm's output will , and the firm's economic profit will ________.

Accepted Answer

A)  increase; increase;
B)  increase increase; increase; decrease
C)  stay the same; stay the same; increase
D)  decrease; stay the same; increase

Question 12

A monopolistically competitive firm has excess capacity in the long run.This means that it:

Accepted Answer

A)  produces less than the output at which average total costs are minimized.
B)  produces less than the output at which price and marginal cost are equal.
C)  could produce more by moving to a larger plant.
D)  doesn't maximize profits. A

Question 13

When a monopolistically competitive firm is making zero economic profits, it is producing at the output level at which the average total cost curve is tangent to the demand curve faced by the firm.At this output:

Accepted Answer

A)  the firm is maximizing profits, and marginal cost must equal marginal revenue.
B)  the firm is not maximizing profits, and a slight increase or decrease in output will lead to positive profits.
C)  since economic profits are equal to zero, the condition that marginal revenue equals marginal cost is irrelevant and need not hold.
D)  the condition that marginal revenue equals marginal cost continues to be relevant, but the marginal revenue and marginal cost curves need not intersect directly below the point of tangency between the average total cost curve and the demand curve faced by the firm. A

Question 14

Monopolistic competition describes an industry characterized by a ________ number of firms producing products with for firms.

Accepted Answer

A)  small; identical; barriers to entry
B)  small; similar; relatively easy entry .
C)  large; similar; relatively easy entry .
D)  large; identical; relatively easy entry

Question 15

If a firm operating in monopolistic competition is producing a quantity at which MC < MR, then profit can be ________ by _.

Accepted Answer

A)  increased; decreasing production
B)  increased; increasing production
C)  increased; increasing the price
D)  maximized; decreasing production

Question 16

General Snacks is a typical firm in a market characterized by the model of monopolistic competition.If the market is in long-run equilibrium, then the price General Snacks charges for its snack goods would:

Accepted Answer

A)  equal average total cost.
B)  exceed average total cost.
C)  be less than average total cost.
D)  be greater than the average for all other firms in the market.

Question 17

Many customers will walk right past a diner that serves coffee and go to Starbucks, where they pay more for a cup of coffee.For these customers, cups of coffee are differentiated by:

Accepted Answer

A)  style.
B)  location.
C)  quality.
D)  type.

Question 18

In the short run, a monopolistically competitive firm produces at the optimal level of output and is earning positive economic profits.Which of the following describes how this firm will adjust in the long run?

Accepted Answer

A)  The entry of new firms shifts the firm's demand and marginal revenue curves leftward, decreasing the firm's level of output and the price the firm can charge until price equals average total cost.
B)  The entry of new firms shifts the firm's demand and marginal revenue curves leftward, decreasing the firm's level of output and increasing the price the firm can charge until price equals average total cost.
C)  The entry of new firms shifts the firm's marginal cost and average cost curves downward, decreasing the firm's level of output and the price the firm can charge until price equals average total cost.
D)  The exit of firms shifts the firm's demand and marginal revenue curves rightward, increasing the firm's level of output and the price the firm can charge until price equals average total cost.

Question 19

(Table: Spring Water)  The table Spring Water shows the demand and cost data for a firm in a monopolistically competitive industry producing drinking water from underground springs.If the industry were perfect competition, the profit-maximizing output would be cases.

Accepted Answer

A)  6
B)  0
C)  between 6 and 7 cases
D)  between 7 and 8 cases

Question 20

Which of the following is true?

Accepted Answer

A)  Monopolistic competition and perfect competition are both inefficient.
B)  Monopolistic competition is efficient because of product differentiation.
C)  The inefficiency of monopolistic competition may be a small price to pay for the wide range of product choices it offers.
D)  The inefficiency of monopolistic competition is a result of advertising expenses.

Exam 15: Monopolistic Competition and Product Differentiation

Correct Answer
verified

The restaurant industry is characterized by excess capacity.This means that:

Correct Answer
verified

A monopolistically competitive firm is limited in the price it can set by the competition it faces from other existing and potential firms that produce close substitutes.False

Correct Answer
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Figure: Monopolistic Competition IV (Figure: Monopolistic Competition IV) The monopolistic competitor in the figure Monopolistic Competition IV is producing at the output level that maximizes profits (minimizes losses) .The shaded rectangle depicts the level of:

Correct Answer
verified

Correct Answer
verified

Why are some consumers willing to pay more for a bottle of Advil than they are willing to pay for a bottle of ibuprofen tablets, when ibuprofen is the pain-relieving ingredient found in Advil?

Correct Answer
verified
Advil is a successful brand name that se...
View Answer

Since a monopolistically competitive firm faces a downward-sloping demand curve for its product, its price will be:

Correct Answer
verified

The _________ demand curve for a firm operating in a monopolistically competitive market _.

Correct Answer
verified

Monopolistically competitive firms:

Correct Answer
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Figure: Monopolistic Competition II (Figure: Monopolistic Competition II) Which of the panels in the figure Monopolistic Competition II shows a monopolistic competitor earning a profit in the short run?

Correct Answer
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A

A gas station operates in a monopolistically competitive market and is in short-run equilibrium.Suppose that a fixed cost for this firm decreases.As a result, the firm's price will , the firm's output will , and the firm's economic profit will .

Correct Answer
verified

A monopolistically competitive firm has excess capacity in the long run.This means that it:

Correct Answer
verified
A

When a monopolistically competitive firm is making zero economic profits, it is producing at the output level at which the average total cost curve is tangent to the demand curve faced by the firm.At this output:

Correct Answer
verified
A

Monopolistic competition describes an industry characterized by a ________ number of firms producing products with for firms.

Correct Answer
verified

If a firm operating in monopolistic competition is producing a quantity at which MC < MR, then profit can be ________ by _.

Correct Answer
verified

General Snacks is a typical firm in a market characterized by the model of monopolistic competition.If the market is in long-run equilibrium, then the price General Snacks charges for its snack goods would:

Correct Answer
verified

Many customers will walk right past a diner that serves coffee and go to Starbucks, where they pay more for a cup of coffee.For these customers, cups of coffee are differentiated by:

Correct Answer
verified

In the short run, a monopolistically competitive firm produces at the optimal level of output and is earning positive economic profits.Which of the following describes how this firm will adjust in the long run?

Correct Answer
verified

(Table: Spring Water) The table Spring Water shows the demand and cost data for a firm in a monopolistically competitive industry producing drinking water from underground springs.If the industry were perfect competition, the profit-maximizing output would be cases.

Correct Answer
verified

Which of the following is true?

Correct Answer
verified

Exam 15: Monopolistic Competition and Product Differentiation

Correct AnswerverifiedShow Answer

The restaurant industry is characterized by excess capacity.This means that:

Correct AnswerverifiedShow Answer

A monopolistically competitive firm is limited in the price it can set by the competition it faces from other existing and potential firms that produce close substitutes.False

Correct AnswerverifiedShow Answer

Figure: Monopolistic Competition IV (Figure: Monopolistic Competition IV) The monopolistic competitor in the figure Monopolistic Competition IV is producing at the output level that maximizes profits (minimizes losses) .The shaded rectangle depicts the level of:

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Why are some consumers willing to pay more for a bottle of Advil than they are willing to pay for a bottle of ibuprofen tablets, when ibuprofen is the pain-relieving ingredient found in Advil?

Correct AnswerverifiedAdvil is a successful brand name that se...View AnswerShow Answer

Since a monopolistically competitive firm faces a downward-sloping demand curve for its product, its price will be:

Correct AnswerverifiedShow Answer

The _________ demand curve for a firm operating in a monopolistically competitive market _.

Correct AnswerverifiedShow Answer

Monopolistically competitive firms:

Correct AnswerverifiedShow Answer

Figure: Monopolistic Competition II (Figure: Monopolistic Competition II) Which of the panels in the figure Monopolistic Competition II shows a monopolistic competitor earning a profit in the short run?

Correct AnswerverifiedA

A gas station operates in a monopolistically competitive market and is in short-run equilibrium.Suppose that a fixed cost for this firm decreases.As a result, the firm's price will ________, the firm's output will , and the firm's economic profit will ________.

Correct AnswerverifiedShow Answer

A monopolistically competitive firm has excess capacity in the long run.This means that it:

Correct AnswerverifiedA

When a monopolistically competitive firm is making zero economic profits, it is producing at the output level at which the average total cost curve is tangent to the demand curve faced by the firm.At this output:

Correct AnswerverifiedA

Monopolistic competition describes an industry characterized by a ________ number of firms producing products with for firms.

Correct AnswerverifiedShow Answer

If a firm operating in monopolistic competition is producing a quantity at which MC < MR, then profit can be ________ by _.

Correct AnswerverifiedShow Answer

General Snacks is a typical firm in a market characterized by the model of monopolistic competition.If the market is in long-run equilibrium, then the price General Snacks charges for its snack goods would:

Correct AnswerverifiedShow Answer

Many customers will walk right past a diner that serves coffee and go to Starbucks, where they pay more for a cup of coffee.For these customers, cups of coffee are differentiated by:

Correct AnswerverifiedShow Answer

In the short run, a monopolistically competitive firm produces at the optimal level of output and is earning positive economic profits.Which of the following describes how this firm will adjust in the long run?

Correct AnswerverifiedShow Answer

(Table: Spring Water) The table Spring Water shows the demand and cost data for a firm in a monopolistically competitive industry producing drinking water from underground springs.If the industry were perfect competition, the profit-maximizing output would be cases.

Correct AnswerverifiedShow Answer

Which of the following is true?

Correct AnswerverifiedShow Answer

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Correct Answer
verified

Correct Answer
verified
Advil is a successful brand name that se...
View Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified
A

A gas station operates in a monopolistically competitive market and is in short-run equilibrium.Suppose that a fixed cost for this firm decreases.As a result, the firm's price will , the firm's output will , and the firm's economic profit will .

Correct Answer
verified

Correct Answer
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A

Correct Answer
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A

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Correct Answer
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