Question 1

The primary reason why monopolistically competitive firms cannot make an economic profit in the long run is because

Accepted Answer

A)   there are barriers to entry.
B)   there is freedom of entry.
C)   the antitrust laws prevent profit from increasing.
D)   recessions occur.
E)   they collude to make a normal profit.F) C) and D)
G) B) and E)

Question 2

-The firm in the above figure has a markup of ________ per meal.

Accepted Answer

A)   $0
B)   $4
C)   $8
D)   $10
E)   more than $10F) D) and E)
G) B) and C)

Question 3

Which of the following statements about a firm in long-run equilibrium is true?

Accepted Answer

A)   P > MC for a firm in monopolistic competition, and P = ATC for a firm in perfect competition
B)   MR > P for a firm in monopolistic competition, and P = ATC for a firm in perfect competition
C)   P = MC for firms in both monopolistic competition and perfect competition
D)   P = MC for a firm in perfect competition, and P 
E)   Both answers A and B are correct.F) B) and C)
G) A) and E)

Question 4

The Herfindahl-Hirschman Index is used as a guideline to determine if a market is competitive or concentrated.Calculate the index value for each market described below.
a.100 firms,each of which produces 1 per cent of market output
b.50 firms,each of which produces 2 per cent of market output
c.25 firms,each of which produces 4 per cent of market output
d.20 firms,each of which produces 5 per cent of market output
e.10 firms,each of which produces 10 per cent of market output
f.5 firms,each of which produces 20 per cent of market output
g.2 firms,each of which produces 50 per cent of market output

Accepted Answer

a.100 × 1 = 100
b.50 × 4 = 200...

Question 5

If a firm in monopolistic competition is making an economic profit,

Accepted Answer

A)   it is in the long run.
B)   other firms can enter the market.
C)   it can do so because it is "monopolistic" and other firms will have a hard time competing with it.
D)   its average cost must exceed its marginal cost.
E)   The question errs because firms in monopolistic competition cannot make an economic profit.F) B) and D)
G) D) and E)

Question 6

Which of the following four-firm concentration ratios would be the best indicator of a monopoly?

Accepted Answer

A)   0.25 percent
B)   31 percent
C)   78 percent
D)   100 percent
E)   89 percentF) B) and D)
G) A) and B)

Question 7

In the long run,firms in monopolistic competition make zero economic profit.When firms make zero economic profit,in the long run they exit the industry.

Accepted Answer

A)   The first sentence is correct and the second sentence is incorrect.
B)   The first sentence is incorrect and the second sentence is correct.
C)   Both sentences are correct.
D)   Both sentences are incorrect.
E)   More information about the presence or absence of barriers to entry and exit is needed to determine if the statements are true or false.F) All of the above
G) A) and D)

Question 8

How does a firm in monopolistic competition determine its price and quantity? What type of profit can it make in the short run and the long run?

Accepted Answer

The firm produces where its marginal cos...

Question 9

If advertising increases the numbers of firms in an industry,each firm's demand

Accepted Answer

A)   increases.
B)   does not change.
C)   decreases.
D)   might increase or decrease depending on whether the new firms produce exactly the same product or a product that is slightly differentiated.
E)   None of the above answers is correct.F) B) and E)
G) All of the above

Question 10

Advertising is a ________ cost that is incurred by ________.

Accepted Answer

A)   variable; monopolies
B)   variable; perfectly competitive firms
C)   fixed; perfectly competitive firms
D)   fixed; monopolistically competitive firms
E)   marginal; monopolistically competitive firmsF) D) and E)
G) A) and C)

Question 11

Because economic profits are eliminated in the long run in monopolistic competition,to make an economic profit,firms continuously

Accepted Answer

A)   shut down.
B)   exit the industry.
C)   develop and market new products.
D)   declare bankruptcy.
E)   decrease their costs by decreasing their selling costs.F) A) and B)
G) A) and C)

Question 12

The Herfindahl-Hirschman Index measures market concentration in an industry by summing the square of the percentage market shares for

Accepted Answer

A)   the 4 largest firms.
B)   the 50 smallest firms.
C)   the 4 smallest firms.
D)   the 50 largest firms.
E)   all firms in the market.F) All of the above
G) B) and D)

Question 13

Which of the following four-firm concentration ratios would be the best indication of a perfectly competitive industry?

Accepted Answer

A)   2 percent
B)   31 percent
C)   78 percent
D)   100 percent
E)   50 percentF) A) and E)
G) B) and D)

Question 14

Explain how selling costs in monopolistic competition affect the efficiency of monopolistic competition.

Accepted Answer

The additional selling costs from produc...

Question 15

Product differentiation allows a firm to compete with another firm on the basis of

Accepted Answer

A)   efficiency.
B)   elasticity.
C)   quality, price, and marketing.
D)   the level of output and the price.
E)   demand.F) C) and D)
G) A) and B)

Question 16

Excess capacity exists when a firm produces

Accepted Answer

A)   more than the profit-maximizing level of output.
B)   less than the quantity that minimizes average total cost.
C)   less than the quantity that minimizes marginal cost.
D)   more than the quantity that minimizes marginal cost.
E)   None of the above answers is correct.F) All of the above
G) B) and E)

Question 17

A firm in monopolistic competition has ________ demand curve.

Accepted Answer

A)   a downward sloping
B)   an upward sloping
C)   a vertical
D)   a horizontal
E)   a U-shapedF) A) and B)
G) B) and D)

Question 18

The figure above shows a firm's demand and marginal revenue curves and its cost curves.
-As long as the firm illustrated above remains open,it will set a price of ________ per month and it will ________.

Accepted Answer

A)   $50; make an economic profit
B)   $50; incur an economic loss
C)   $40; make an economic profit
D)   $40; incur an economic loss
E)   less than $20; incur an economic lossF) A) and B)
G) A) and C)

Question 19

If a firm has excess capacity,it

Accepted Answer

A)   produces less than its efficient scale.
B)   should advertise to maximize profits.
C)   should decrease its markup to increase its profit.
D)   is a perfectly competitive firm.
E)   must face a horizontal demand curve.F) C) and D)
G) B) and D)

Question 20

The three largest firms in an industry have market shares of 40 percent,30 percent,and 2 percent.The remaining 47 firms in the industry each have a market share of 1 percent.The Herfindahl-Hirschman Index (HHI) for this industry is ________.

Accepted Answer

A)   2,551
B)   5,184
C)   24,061
D)   10,000
E)   3,013F) All of the above
G) A) and E)

Exam 17: Monopolistic Competition

Because economic profits are eliminated in the long run in monopolistic competition,to make an economic profit,firms continuously

Correct Answer
verified

The figure above shows a firm's demand and marginal revenue curves and its cost curves. -As long as the firm illustrated above remains open,it will set a price of per month and it will .

Correct Answer
verified

A firm in monopolistic competition has ________ demand curve.

Correct Answer
verified

If a firm has excess capacity,it

Correct Answer
verified

Explain how selling costs in monopolistic competition affect the efficiency of monopolistic competition.

Correct Answer
verified
The additional selling costs from produc...
View Answer

Which of the following four-firm concentration ratios would be the best indicator of a monopoly?

Correct Answer
verified

Advertising is a cost that is incurred by .

Correct Answer
verified

Correct Answer
verified
a.100 × 1 = 100
b.50 × 4 = 200...
View Answer

-The firm in the above figure has a markup of ________ per meal.

Correct Answer
verified

The Herfindahl-Hirschman Index measures market concentration in an industry by summing the square of the percentage market shares for

Correct Answer
verified

In the long run,firms in monopolistic competition make zero economic profit.When firms make zero economic profit,in the long run they exit the industry.

Correct Answer
verified

Which of the following four-firm concentration ratios would be the best indication of a perfectly competitive industry?

Correct Answer
verified

The primary reason why monopolistically competitive firms cannot make an economic profit in the long run is because

Correct Answer
verified

If a firm in monopolistic competition is making an economic profit,

Correct Answer
verified

Which of the following statements about a firm in long-run equilibrium is true?

Correct Answer
verified

How does a firm in monopolistic competition determine its price and quantity? What type of profit can it make in the short run and the long run?

Correct Answer
verified
The firm produces where its marginal cos...
View Answer

Excess capacity exists when a firm produces

Correct Answer
verified

If advertising increases the numbers of firms in an industry,each firm's demand

Correct Answer
verified

The three largest firms in an industry have market shares of 40 percent,30 percent,and 2 percent.The remaining 47 firms in the industry each have a market share of 1 percent.The Herfindahl-Hirschman Index (HHI) for this industry is ________.

Correct Answer
verified

Product differentiation allows a firm to compete with another firm on the basis of

Correct Answer
verified

Exam 17: Monopolistic Competition

Because economic profits are eliminated in the long run in monopolistic competition,to make an economic profit,firms continuously

Correct AnswerverifiedShow Answer

The figure above shows a firm's demand and marginal revenue curves and its cost curves. -As long as the firm illustrated above remains open,it will set a price of ________ per month and it will ________.

Correct AnswerverifiedShow Answer

A firm in monopolistic competition has ________ demand curve.

Correct AnswerverifiedShow Answer

If a firm has excess capacity,it

Correct AnswerverifiedShow Answer

Explain how selling costs in monopolistic competition affect the efficiency of monopolistic competition.

Correct AnswerverifiedThe additional selling costs from produc...View AnswerShow Answer

Which of the following four-firm concentration ratios would be the best indicator of a monopoly?

Correct AnswerverifiedShow Answer

Advertising is a ________ cost that is incurred by ________.

Correct AnswerverifiedShow Answer

Correct Answerverifieda.100 × 1 = 100b.50 × 4 = 200...View AnswerShow Answer

-The firm in the above figure has a markup of ________ per meal.

Correct AnswerverifiedShow Answer

The Herfindahl-Hirschman Index measures market concentration in an industry by summing the square of the percentage market shares for

Correct AnswerverifiedShow Answer

In the long run,firms in monopolistic competition make zero economic profit.When firms make zero economic profit,in the long run they exit the industry.

Correct AnswerverifiedShow Answer

Which of the following four-firm concentration ratios would be the best indication of a perfectly competitive industry?

Correct AnswerverifiedShow Answer

The primary reason why monopolistically competitive firms cannot make an economic profit in the long run is because

Correct AnswerverifiedShow Answer

If a firm in monopolistic competition is making an economic profit,

Correct AnswerverifiedShow Answer

Which of the following statements about a firm in long-run equilibrium is true?

Correct AnswerverifiedShow Answer

How does a firm in monopolistic competition determine its price and quantity? What type of profit can it make in the short run and the long run?

Correct AnswerverifiedThe firm produces where its marginal cos...View AnswerShow Answer

Excess capacity exists when a firm produces

Correct AnswerverifiedShow Answer

If advertising increases the numbers of firms in an industry,each firm's demand

Correct AnswerverifiedShow Answer

The three largest firms in an industry have market shares of 40 percent,30 percent,and 2 percent.The remaining 47 firms in the industry each have a market share of 1 percent.The Herfindahl-Hirschman Index (HHI) for this industry is ________.

Correct AnswerverifiedShow Answer

Product differentiation allows a firm to compete with another firm on the basis of

Correct AnswerverifiedShow Answer

Correct Answer
verified

The figure above shows a firm's demand and marginal revenue curves and its cost curves. -As long as the firm illustrated above remains open,it will set a price of per month and it will .

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified
The additional selling costs from produc...
View Answer

Correct Answer
verified

Advertising is a cost that is incurred by .

Correct Answer
verified

Correct Answer
verified
a.100 × 1 = 100
b.50 × 4 = 200...
View Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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The firm produces where its marginal cos...
View Answer

Correct Answer
verified

Correct Answer
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Correct Answer
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Correct Answer
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