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An industry having a four-firm concentration ratio of 30 percent


A) approximates pure competition.
B) is an oligopoly.
C) is a pure monopoly.
D) is monopolistically competitive.

E) None of the above
F) A) and D)

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Refer to the above graphs. The differences in the long-run equilibrium positions for a monopolistically competitive firm and for a purely competitive firm are illustrated by graphs A) A and B. B) B and C. C) C and D. D) A and C. Refer to the above graphs. The differences in the long-run equilibrium positions for a monopolistically competitive firm and for a purely competitive firm are illustrated by graphs


A) A and B.
B) B and C.
C) C and D.
D) A and C.

E) A) and D)
F) A) and C)

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When a monopolistically competitive firm is in long-run equilibrium,


A) P = MC = ATC.
B) MR = MC and minimum ATC > P.
C) MR > MC and P = minimum ATC.
D) MR = MC and P> minimum ATC.

E) None of the above
F) A) and B)

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Keely says that he's glad that his morning coffee is sold in a monopolistically competitive market rather than a purely competitive market. If this is true for most things Keely buys, it suggests that he


A) is most concerned about paying the lowest price possible.
B) cares most about allocative efficiency.
C) is willing to pay extra for product variety.
D) is a creature of habit who always buys the same type of a particular good.

E) A) and B)
F) None of the above

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Assume that in a monopolistically competitive industry, firms are earning economic profit. This situation will


A) reduce the excess capacity in the industry as firms expand production.
B) attract other firms to enter the industry, causing the existing firms' profits to shrink.
C) cause firms to standardize their product to limit the degree of competition.
D) make the industry allocatively efficient as each firm seeks to maintain its profits.

E) None of the above
F) B) and C)

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Assume that the short-run cost and demand data given in the tables below confront a monopolistic competitor selling a given product and engaged in a given amount of product promotion. Assume that the short-run cost and demand data given in the tables below confront a monopolistic competitor selling a given product and engaged in a given amount of product promotion. What will the maximum total profits be? A) $65 B) $90 C) $85 D) $110 What will the maximum total profits be?


A) $65
B) $90
C) $85
D) $110

E) A) and D)
F) C) and D)

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If some firms leave a monopolistically competitive industry, the demand curves of the remaining firms will


A) be unaffected.
B) shift to the left.
C) become more elastic.
D) shift to the right.

E) A) and B)
F) B) and D)

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If the minimum wage in the restaurant industry increases over time, eventually we would expect


A) the restaurant industry to expand as higher wages drive up demand.
B) there to be fewer of all types of restaurants, but no change in the proportion of mom and pop restaurants relative to chain restaurants.
C) the ratio of mom and pop restaurants to highly capitalized chain restaurants to increase.
D) the ratio of highly capitalized chain restaurants to mom and pop restaurants to increase.

E) B) and D)
F) A) and D)

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The highest possible value of the Herfindahl index is 1,000.

A) True
B) False

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Suppose some firms exit an industry characterized by monopolistic competition. We would expect the demand curve of a firm already in the industry to


A) shift to the left.
B) shift to the right.
C) become less elastic.
D) remain the same since entering firms serve other customers in the market.

E) None of the above
F) All of the above

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Demand and marginal revenue curves are downward-sloping for monopolistically competitive firms because


A) each firm has to take the market price as given.
B) product differentiation allows each firm some degree of monopoly power.
C) there are a few large firms in the industry and they each act as a monopolist.
D) mutual interdependence among all firms in the industry leads to collusion.

E) A) and B)
F) A) and C)

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Refer to the above graph of a representative firm in monopolistic competition. If curve (2) represents ATC and line (3) represents demand, then curve (1) and line (4) would be A) MC and TR, respectively. B) AVC and MR, respectively. C) MC and MR, respectively. D) TC and TR, respectively. Refer to the above graph of a representative firm in monopolistic competition. If curve (2) represents ATC and line (3) represents demand, then curve (1) and line (4) would be


A) MC and TR, respectively.
B) AVC and MR, respectively.
C) MC and MR, respectively.
D) TC and TR, respectively.

E) All of the above
F) B) and C)

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Assume that the short-run cost and demand data given in the tables below confront a monopolistic competitor selling a given product and engaged in a given amount of product promotion. Assume that the short-run cost and demand data given in the tables below confront a monopolistic competitor selling a given product and engaged in a given amount of product promotion. If the firm sells 2 units of output, marginal revenue will be A) $28. B) $44. C) $-4. D) $92. If the firm sells 2 units of output, marginal revenue will be


A) $28.
B) $44.
C) $-4.
D) $92.

E) A) and B)
F) All of the above

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Refer to the diagram for a monopolistically competitive firm. If more firms were to enter the industry and product differentiation were to weaken, then A) resource misallocation would become more severe. B) the demand curve would become more elastic. C) firms would begin earning economic profits. D) the firm would achieve allocative efficiency. Refer to the diagram for a monopolistically competitive firm. If more firms were to enter the industry and product differentiation were to weaken, then


A) resource misallocation would become more severe.
B) the demand curve would become more elastic.
C) firms would begin earning economic profits.
D) the firm would achieve allocative efficiency.

E) A) and B)
F) A) and C)

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Answer the question on the basis of the following demand and cost data for a specific firm. Answer the question on the basis of the following demand and cost data for a specific firm. If columns (1) and (3) of the demand data shown are this firm's demand schedule, the profit-maximizing level of output will be A) 8 units. B) 9 units. C) 10 units. D) 11 units. If columns (1) and (3) of the demand data shown are this firm's demand schedule, the profit-maximizing level of output will be


A) 8 units.
B) 9 units.
C) 10 units.
D) 11 units.

E) All of the above
F) B) and D)

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The long-run equilibrium position of the monopolistically competitive firm occurs at a point where average costs are


A) constant.
B) increasing.
C) decreasing.
D) at their minimum point.

E) A) and B)
F) A) and C)

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Monopolistically competitive industries are inefficient because


A) they realize diseconomies of scale.
B) advertising costs retard technological advance and product development.
C) they are overpopulated with firms whose plants are underutilized.
D) monopolistically competitive sellers engage in misleading advertising.

E) B) and C)
F) A) and C)

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In long-run equilibrium, a profit-maximizing firm in a monopolistically competitive industry will produce the quantity of output where


A) ATC = P, MR = MC = P.
B) ATC < P, MR = MC = P.
C) ATC < P, MR + MC < P.
D) ATC = P, MR = MC < P.

E) None of the above
F) B) and C)

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The monopolistic competition model assumes that


A) allocative efficiency will be achieved.
B) productive efficiency will be achieved.
C) firms will engage in nonprice competition.
D) firms will realize economic profits in the long run.

E) B) and C)
F) A) and C)

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