Question 1

The graph depicts a monopolistically competitive firm.  In the short run, this monopolistically competitive firm will set the price at

Accepted Answer

A)  $55 and produce 45 units of output.
B)  $65 and produce 35 units of output.
C)  $50 and produce 35 units of output.
D)  $52 and produce 50 units of output.E) A) and B)
F) C) and D)

Question 2

One difference between monopolistic competition and pure competition is that

Accepted Answer

A)  products may be homogeneous in monopolistic competition.
B)  there is some control over price in monopolistic competition.
C)  monopolistic competition has significant barriers to entry.
D)  firms differentiate their products in pure competition.E) B) and C)
F) A) and C)

Question 3

Assume the top six firms comprising an industry have market shares of 10, 8, 8, 5, 5, and 4 percent. The remaining 30 firms each have market shares of 2 percent. The Herfindahl index for this industry is

Accepted Answer

A)  253.
B)  31.
C)  414.
D)  294.E) A) and B)
F) C) and D)

Question 4

Raising the minimum wage in the restaurant industry

Accepted Answer

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

Question 5

Answer the question on the basis of the following demand and cost data for a specific firm.  Suppose that entry into the industry changes this firm's demand schedule from columns (1) and (3) to columns (2) and (3) . Economic profit will

Accepted Answer

A)  fall by $10.
B)  fall to $6.
C)  increase by $10.
D)  decline to zero.E) B) and D)
F) None of the above

Question 6

In Wendy's 1987 commercial depicting a Soviet fashion show, one objective was to portray McDonald's and Burger King products as

Accepted Answer

A)  all the same and not very appealing.
B)  produced inefficiently.
C)  unpredictable in terms of features and quality.
D)  only appealing to old women.E) All of the above
F) None of the above

Question 7

Long-run equilibrium for a monopolistically competitive firm where economic profits are zero results from

Accepted Answer

A)  rising marginal costs.
B)  a perfectly elastic product demand curve.
C)  relatively easy entry.
D)  product differentiation and development.E) B) and C)
F) A) and D)

Question 8

Communist central planners didn't care about product differentiation, opting instead for a uniform design of products in order to achieve

Accepted Answer

A)  higher prices and profits for their firms.
B)  mass production and lower costs.
C)  allocative efficiency in society.
D)  purely competitive markets.E) B) and D)
F) A) and C)

Question 9

The four-firm sales concentration ratio for an industry measures the

Accepted Answer

A)  geographic concentration of firms.
B)  extent to which the four largest firms dominate the production of a good.
C)  percentage of the industry's capital facilities owned by the four largest firms.
D)  degree of X-inefficiency in the industry.E) A) and D)
F) All of the above

Question 10

Product differentiation is what allows monopolistically competitive firms to have some market power.

Accepted Answer

A) True 
 B)False

Question 11

In the short run, a profit-maximizing monopolistically competitive firm sets it price

Accepted Answer

A)  equal to marginal revenue.
B)  equal to marginal cost.
C)  above marginal cost.
D)  below marginal cost.E) B) and C)
F) B) and D)

Question 12

Assume the top six firms comprising an industry have market shares of 21, 17, 16, 11, 9, and 6 percent. The remaining 10 firms each have market shares of 2 percent. The Herfindahl index for this industry is

Accepted Answer

A)  1,107.
B)  65.
C)  1,264.
D)  1,224.E) B) and D)
F) B) and C)

Question 13

In which of these continuums of degrees of competition (highest to lowest) is monopolistic competition properly placed?

Accepted Answer

A)  pure competition, oligopoly, pure monopoly, monopolistic competition
B)  oligopoly, pure competition, monopolistic competition, pure monopoly
C)  monopolistic competition, pure competition, pure monopoly, oligopoly
D)  pure competition, monopolistic competition, oligopoly, pure monopolyE) B) and C)
F) A) and D)

Question 14

Which is not a common form of nonprice competition in monopolistic competition?

Accepted Answer

A)  customer services such as liberal guarantee and repair policies
B)  advertisements featuring brand names
C)  cash rebates and discount coupons
D)  annual design and model changesE) None of the above
F) A) and B)

Question 15

If monopolistically competitive firms in an industry are making an economic profit, then new firms will enter the industry and the product demand facing existing firms will

Accepted Answer

A)  increase.
B)  become less elastic.
C)  not be affected.
D)  decrease.E) None of the above
F) A) and C)

Question 16

The monopolistically competitive seller's demand curve will become more elastic the

Accepted Answer

A)  more significant the barriers to entering the industry.
B)  greater the degree of product differentiation.
C)  larger the number of competitors.
D)  smaller the number of competitors.E) A) and C)
F) All of the above

Question 17

If all monopolistically competitive firms in the industry have profit circumstances similar to the firm shown,

Accepted Answer

A)  new firms will enter the industry.
B)  some firms will exit the industry.
C)  all firms will exit the industry.
D)  no firms will exit the industry.E) None of the above
F) B) and D)

Question 18

In long-run equilibrium, both purely competitive and monopolistically competitive firms will

Accepted Answer

A)  produce at minimum average total cost.
B)  earn economic profits.
C)  achieve allocative efficiency.
D)  equate marginal cost and marginal revenue.E) B) and C)
F) B) and D)

Question 19

Answer the question based on the demand and cost schedules for a monopolistically competitive firm given in the table below.  At the profit-maximizing level of output, marginal revenue is

Accepted Answer

A)  $14.
B)  $42.
C)  $10.
D)  $1.E) A) and D)
F) A) and B)

Question 20

The downward-sloping demand curve of a monopolistic competitor

Accepted Answer

A)  reflects some level of control over its own price.
B)  becomes eventually horizontal in the long run.
C)  indicates collusion among the members of the product group.
D)  ensures that the firm will produce at minimum average cost in the long run.E) A) and D)
F) A) and B)

Exam 13: Monopolistic Competition

If all monopolistically competitive firms in the industry have profit circumstances similar to the firm shown,

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Assume the top six firms comprising an industry have market shares of 21, 17, 16, 11, 9, and 6 percent. The remaining 10 firms each have market shares of 2 percent. The Herfindahl index for this industry is

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Which is not a common form of nonprice competition in monopolistic competition?

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The four-firm sales concentration ratio for an industry measures the

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Raising the minimum wage in the restaurant industry

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The graph depicts a monopolistically competitive firm. In the short run, this monopolistically competitive firm will set the price at

Correct AnswerverifiedShow Answer

Answer the question on the basis of the following demand and cost data for a specific firm. Suppose that entry into the industry changes this firm's demand schedule from columns (1) and (3) to columns (2) and (3) . Economic profit will

Correct AnswerverifiedShow Answer

Answer the question based on the demand and cost schedules for a monopolistically competitive firm given in the table below. At the profit-maximizing level of output, marginal revenue is

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In Wendy's 1987 commercial depicting a Soviet fashion show, one objective was to portray McDonald's and Burger King products as

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The monopolistically competitive seller's demand curve will become more elastic the

Correct AnswerverifiedShow Answer

One difference between monopolistic competition and pure competition is that

Correct AnswerverifiedShow Answer

The downward-sloping demand curve of a monopolistic competitor

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Product differentiation is what allows monopolistically competitive firms to have some market power.

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If monopolistically competitive firms in an industry are making an economic profit, then new firms will enter the industry and the product demand facing existing firms will

Correct AnswerverifiedShow Answer

In long-run equilibrium, both purely competitive and monopolistically competitive firms will

Correct AnswerverifiedShow Answer

Assume the top six firms comprising an industry have market shares of 10, 8, 8, 5, 5, and 4 percent. The remaining 30 firms each have market shares of 2 percent. The Herfindahl index for this industry is

Correct AnswerverifiedShow Answer

In which of these continuums of degrees of competition (highest to lowest) is monopolistic competition properly placed?

Correct AnswerverifiedShow Answer

Communist central planners didn't care about product differentiation, opting instead for a uniform design of products in order to achieve

Correct AnswerverifiedShow Answer

Long-run equilibrium for a monopolistically competitive firm where economic profits are zero results from

Correct AnswerverifiedShow Answer

In the short run, a profit-maximizing monopolistically competitive firm sets it price

Correct AnswerverifiedShow Answer

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