Question 1

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?

Accepted Answer

A)  $65
B)  $90
C)  $85
D)  $110E) A) and C)
F) A) and B)

Question 2

Refer to the data. The four-firm concentration ratio for this industry is

Accepted Answer

A)  70 percent.
B)  85 percent.
C)  100 percent.
D)  indeterminate because we don't know which four firms are included.E) B) and C)
F) B) and D)

Question 3

The graph depicts a monopolistically competitive firm.  This monopolistically competitive firm is earning economic profits in the short run and

Accepted Answer

A)  will continue to have economic profits in the long run.
B)  will earn only normal profits in the long run.
C)  this will cause its demand curve to shift to the right in the long run.
D)  this will cause its cost curves to rise in the long run.E) A) and C)
F) C) and D)

Question 4

That one thing that monopolistic competition provides, which is not assured in the other market structures, is product variety.

Accepted Answer

A) True 
 B)False

Question 5

In the long run, a representative firm in a monopolistically competitive industry will end up

Accepted Answer

A)  having an elasticity of demand that will be less than it was in the short run.
B)  having a larger number of competitors than it will in the short run.
C)  producing a level of output at which marginal cost and price are equal.
D)  earning a normal profit, but not an economic profit.E) C) and D)
F) None of the above

Question 6

The demand curve of a monopolistically competitive producer is

Accepted Answer

A)  less elastic than that of either a pure monopolist or a pure competitor.
B)  less elastic than that of a pure monopolist, but more elastic than that of a pure competitor.
C)  more elastic than that of a pure monopolist, but less elastic than that of a pure competitor.
D)  more elastic than that of either a pure monopolist or a pure competitor.E) A) and B)
F) B) and C)

Question 7

Refer to the above graph of a representative firm in monopolistic competition. If curve (2) represents ATC and line (3) represents demand, then we can conclude that the industry

Accepted Answer

A)  has positive economic profits.
B)  is in long-run equilibrium.
C)  will contract in the long run.
D)  is not maximizing profits.E) A) and B)
F) None of the above

Question 8

Monopolistic competition is characterized by firms

Accepted Answer

A)  producing differentiated products.
B)  making economic profits in the long run.
C)  producing at optimal productive efficiency.
D)  producing where price equals marginal cost.E) A) and B)
F) B) and D)

Question 9

Which statement concerning monopolistic competition is false?

Accepted Answer

A)  In the long run P = ATC > MC.
B)  Firms may experience losses in the short run.
C)  Firms differentiate their products, but the products are relatively substitutable.
D)  Firms may experience positive economic profits in the long run.E) A) and B)
F) A) and C)

Question 10

Which of the following characteristics provide a monopolistically competitive firm some monopoly power?

Accepted Answer

A)  significant barriers to entry into the industry
B)  product differentiation
C)  a low concentration ratio in the industry
D)  price discriminationE) A) and D)
F) C) and D)

Question 11

Which of the following forces does not play a major part in the adjustments of a monopolistically competitive industry toward its long-run equilibrium?

Accepted Answer

A)  profits/losses making firms enter or exit the industry
B)  firms expanding or shrinking their productive capacity
C)  introduction of new products and patents
D)  shifts in the demand curves of individual firms as the industry expands or contractsE) A) and B)
F) A) and C)

Question 12

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 output and price levels will maximize the firm's profit in the short run?

Accepted Answer

A)  3 units and $45
B)  4 units and $40
C)  5 units and $35
D)  6 units and $30E) A) and C)
F) A) and B)

Question 13

What are four-firm concentration ratios? How do economists use them to define monopolistically competitive industries?

Accepted Answer

Economists measure the degree of industr...

Question 14

Refer to the above graphs. The long-run equilibrium for a monopolistically competitive firm is represented by graph

Accepted Answer

A)  A.
B)  B.
C)  C.
D)  D.E) B) and C)
F) A) and B)

Question 15

Suppose that total sales in an industry in a particular year are $800 million and sales by the top four sellers are $50 million, $40 million, $30 million, and $30 million, respectively. We can conclude that

Accepted Answer

A)  allocative efficiency will be achieved.
B)  this industry is monopolistically competitive.
C)  the concentration ratio is 25 percent.
D)  firms in this industry likely collude with each other.E) A) and D)
F) All of the above

Question 16

In which industry is monopolistic competition most likely to be found?

Accepted Answer

A)  utilities
B)  agriculture
C)  retail trade
D)  miningE) A) and B)
F) A) and C)

Question 17

Refer to the diagram for a monopolistically competitive firm. Long-run equilibrium output will be

Accepted Answer

A)  greater than E.
B)  E.
C)  D.
D)  C.E) A) and C)
F) A) and B)

Question 18

The Herfindahl index for a pure monopolist is

Accepted Answer

A)  100.
B)  10,000.
C)  100,000.
D)  10.E) All of the above
F) B) and C)

Question 19

As new firms enter a monopolistically competitive market, the demand curves facing existing firms will tend to shift left.

Accepted Answer

A) True 
 B)False

Question 20

Monopolistically competitive and purely competitive industries are similar in that

Accepted Answer

A)  both are assured of short-run economic profits.
B)  both produce differentiated products.
C)  the demand curves facing individual firms are perfectly elastic in both industries.
D)  there are few, if any, barriers to entry.E) All of the above
F) B) and D)

Exam 13: Monopolistic Competition

Monopolistically competitive and purely competitive industries are similar in that

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Monopolistic competition is characterized by firms

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Which of the following forces does not play a major part in the adjustments of a monopolistically competitive industry toward its long-run equilibrium?

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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. What will the maximum total profits be?

Correct AnswerverifiedShow Answer

In the long run, a representative firm in a monopolistically competitive industry will end up

Correct AnswerverifiedShow Answer

The graph depicts a monopolistically competitive firm. This monopolistically competitive firm is earning economic profits in the short run and

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Refer to the above graphs. The long-run equilibrium for a monopolistically competitive firm is represented by graph

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The Herfindahl index for a pure monopolist is

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Which of the following characteristics provide a monopolistically competitive firm some monopoly power?

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What are four-firm concentration ratios? How do economists use them to define monopolistically competitive industries?

Correct AnswerverifiedEconomists measure the degree of industr...View AnswerShow Answer

In which industry is monopolistic competition most likely to be found?

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Refer to the diagram for a monopolistically competitive firm. Long-run equilibrium output will be

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Which statement concerning monopolistic competition is false?

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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 we can conclude that the industry

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The demand curve of a monopolistically competitive producer is

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That one thing that monopolistic competition provides, which is not assured in the other market structures, is product variety.

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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. What output and price levels will maximize the firm's profit in the short run?

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Refer to the data. The four-firm concentration ratio for this industry is

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As new firms enter a monopolistically competitive market, the demand curves facing existing firms will tend to shift left.

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Suppose that total sales in an industry in a particular year are $800 million and sales by the top four sellers are $50 million, $40 million, $30 million, and $30 million, respectively. We can conclude that

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Economists measure the degree of industr...
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