Question 1

-Use the above figure. When it maximizes its economic profits, the monopolistically competitive firm depicted in the figure

Accepted Answer

A)   is earning an economic profit.
B)   is earning an accounting profit.
C)   is earning an economic loss.
D)   must increase output to reduce the ATC.E) B) and D)
F) None of the above

Question 2

Which of the following products is most likely to be sold in a monopolistically competitive market?

Accepted Answer

A)   fast food
B)   coal
C)   wheat
D)   electricityE) A) and D)
F) C) and D)

Question 3

Which of the following statements is INCORRECT regarding the properties of information products?

Accepted Answer

A)   Providing an information product entails incurring relatively high fixed costs.
B)   The average total cost curve for a firm that sells an information product slopes upward.
C)   The firm experiences economies of operation in the short run.
D)   In the long run, the producer earns sufficient revenue to cover the opportunity cost of capital.E) A) and B)
F) B) and D)

Question 4

If a customer buys an airline ticket based only on the price of the ticket, then the airline ticket is a(n)

Accepted Answer

A)   experience good.
B)   credence good.
C)   logo good.
D)   search good.E) None of the above
F) A) and D)

Question 5

A monopolistic competitor would face a demand curve with a

Accepted Answer

A)   positive slope.
B)   negative slope.
C)   constant slope.
D)   slope equal to 0.E) A) and B)
F) A) and C)

Question 6

Advertising by monopolistically competitive firms can do all of the following EXCEPT

Accepted Answer

A)   lower the consumer's purchase price.
B)   help differentiate a firm's product.
C)   act as a signal to consumers that the company is serious about staying in business.
D)   result in increased profits for the advertising firm.E) B) and C)
F) A) and D)

Question 7

The main objective of advertising for a monopolistically competitive firm is

Accepted Answer

A)   to differentiate the product and boost demand.
B)   to reduce cost.
C)   to earn long run profits.
D)   none of the above.E) A) and B)
F) A) and C)

Question 8

-In the above figure for a monopolistically competitive firm, the total cost at the profit-maximizing point is

Accepted Answer

A)   $480
B)   $400
C)   $540
D)   $880E) A) and B)
F) All of the above

Question 9

A good that entails relatively high fixed costs associated with the use of knowledge and other information-intensive inputs as key factors of production is

Accepted Answer

A)   a logo good.
B)   a search good.
C)   a persuasive good.
D)   an information product.E) A) and C)
F) A) and D)

Question 10

In the long run, the economic profits of a monopolistically competitive firm

Accepted Answer

A)   will tend to be larger than in the short run.
B)   equal zero.
C)   will be the average short-run profits earned in the last five years.
D)   will be the same as in the short run.E) C) and D)
F) None of the above

Question 11

In the long run, in a monopolistically competitive market, price will be

Accepted Answer

A)   equal to MR.
B)   equal to MC.
C)   greater ATC.
D)   equal to ATC.E) A) and C)
F) None of the above

Question 12

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

Accepted Answer

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

Question 13

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

Accepted Answer

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

Question 14

All of the following are assumptions of monopolistic competition EXCEPT

Accepted Answer

A)   many buyers and sellers.
B)   homogeneous product.
C)   easy entry of new firms in the long run.
D)   profit-maximizing behavior.E) A) and B)
F) A) and C)

Question 15

The short-run profit-maximizing output level for a monopolistically competitive firm is the point at which

Accepted Answer

A)   P = ATC.
B)   MR = MC.
C)   MR > P.
D)   MR > ATC.E) A) and B)
F) None of the above

Question 16

In order to differentiate their product brands from those of competing firms, monopolistically competitive firms

Accepted Answer

A)   equate marginal cost to marginal revenue to determine the profit maximizing quantity.
B)   spread false rumors about their competitors.
C)   take their competitor's reactions to changes in their policies into account.
D)   advertise their product.E) C) and D)
F) All of the above

Question 17

Because the products of firms in a monopolistically competitive market are not homogeneous, the

Accepted Answer

A)   demand curve for the industry is the same for the firm.
B)   demand curve for the firm's product is horizontal.
C)   demand curve for the firm's product is downward sloping.
D)   demand curve for the firm's product is upward sloping.E) None of the above
F) A) and B)

Question 18

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

Accepted Answer

A)   $300.
B)   $285.
C)   $180.
D)   $255.E) All of the above
F) C) and D)

Question 19

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

Accepted Answer

A)   Curve 1
B)   Curve 2
C)   Curve 3
D)   Any of the 3 could be AFC.E) A) and B)
F) A) and C)

Question 20

Explain why the amount that firms spend on advertising depends on the characteristics of their products.

Accepted Answer

There are three types of goods: search g...

Exam 25: Monopolistic Competition

-Use the above figure. When it maximizes its economic profits, the monopolistically competitive firm depicted in the figure

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In the long run, the economic profits of a monopolistically competitive firm

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Which of the following products is most likely to be sold in a monopolistically competitive market?

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

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Advertising by monopolistically competitive firms can do all of the following EXCEPT

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

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All of the following are assumptions of monopolistic competition EXCEPT

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

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Which of the following statements is INCORRECT regarding the properties of information products?

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The short-run profit-maximizing output level for a monopolistically competitive firm is the point at which

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In the long run, in a monopolistically competitive market, price will be

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Because the products of firms in a monopolistically competitive market are not homogeneous, the

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In order to differentiate their product brands from those of competing firms, monopolistically competitive firms

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A good that entails relatively high fixed costs associated with the use of knowledge and other information-intensive inputs as key factors of production is

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The main objective of advertising for a monopolistically competitive firm is

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Explain why the amount that firms spend on advertising depends on the characteristics of their products.

Correct AnswerverifiedThere are three types of goods: search g...View AnswerShow Answer

A monopolistic competitor would face a demand curve with a

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If a customer buys an airline ticket based only on the price of the ticket, then the airline ticket is a(n)

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

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-In the above figure for a monopolistically competitive firm, the total cost at the profit-maximizing point is

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There are three types of goods: search g...
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