13–41
9.99
8.85
7
7
62
9.00
8.00
8
8
64
8.00
7.00
9
9
67
7.10
6.10
10
10
72
6.00
5.00
11
11
79
5.15
4.15
12
12
86
If columns (1) and (3) of the demand data shown are this firm’s demand schedule, the
profit–maximizing level of output will be
82.
Answer the question on the basis of the following demand and cost data for a specific
firm.
Demand Data
Cost Data
(1)
Price
(2)
Price
(3)
Quanti
ty
Outpu
t
Total
Cost
$11.0
0
$10.0
0
6
6
$61
9.99
8.85
7
7
62
9.00
8.00
8
8
64
8.00
7.00
9
9
67
7.10
6.10
10
10
72
6.00
5.00
11
11
79
5.15
4.15
12
12
86
If columns (1) and (3) of the demand data shown are this firm’s demand schedule, the
profit-maximizing price will be
83.
Answer the question on the basis of the following demand and cost data for a specific
firm.
Demand Data
Cost Data
(1)
Price
(2)
Price
(3)
Quanti
ty
Output
Total
Cost
$11.0
0
$10.0
0
6
6
$61
9.99
8.85
7
7
62
9.00
8.00
8
8
64
8.00
7.00
9
9
67
7.10
6.10
10
10
72
6.00
5.00
11
11
79
5.15
4.15
12
12
86
If columns (1) and (3) of the demand data shown are this firm’s demand schedule,
economic profit will be
13–43
Copyright © 2018 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior
written consent of McGraw-Hill Education.
AACSB: Reflective Thinking
Blooms: Understand
Difficulty:
02 Medium
Learning Objective: 13–02 Explain why monopolistic competitors earn only a normal
profit in the long run.
Test Bank: I
Topic:
Price and Output in Monopolistic Competition
Type: Table
84.
Answer the question on the basis of the following demand and cost data for a specific
firm.
Demand Data
Cost Data
(1)
Price
(2)
Price
(3)
Quantit
y
Output
Total
Cost
$11.00
$10.00
6
6
$61
9.99
8.85
7
7
62
9.00
8.00
8
8
64
8.00
7.00
9
9
67
7.10
6.10
10
10
72
6.00
5.00
11
11
79
5.15
4.15
12
12
86
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
13–44
85.
Answer the question on the basis of the following demand and cost data for a specific
firm.
Demand Data
Cost Data
(1)
Price
(2)
Price
(3)
Quantit
y
Output
Total
Cost
$11.0
0
$10.0
0
6
6
$61
9.99
8.85
7
7
62
9.00
8.00
8
8
64
8.00
7.00
9
9
67
7.10
6.10
10
10
72
6.00
5.00
11
11
79
5.15
4.15
12
12
86
Suppose that entry into this industry changes this firm’s demand schedule from columns (1)
and (3) to columns (2) and (3). We can conclude that this industry is
86.
Answer the question on the basis of the following demand and cost data for a specific
firm.
Demand Data
Cost Data
(1)
Price
(2)
Price
(3)
Quanti
Output
Total
Cost
13–45
ty
$11.0
0
$10.0
0
6
6
$61
9.99
8.85
7
7
62
9.00
8.00
8
8
64
8.00
7.00
9
9
67
7.10
6.10
10
10
72
6.00
5.00
11
11
79
5.15
4.15
12
12
86
With the demand schedule shown by columns (2) and (3), in long-run equilibrium
87. An important similarity between a monopolistically competitive firm and a purely
competitive firm is that
88. An important similarity between a monopolistically competitive firm and a pure
monopolist is that both
89. The less elastic a monopolistic competitor’s long-run demand curve, the
90.
Refer to the diagram for a monopolistically competitive producer. The firm is
91.
Refer to the diagram for a monopolistically competitive producer. This firm is
experiencing
92.
Refer to the diagram for a monopolistically competitive producer. If this firm were to
realize productive efficiency, it would
93. In the long run, a monopolistically competitive firm
94. Monopolistically competitive industries are inefficient because
95. The economic inefficiencies of monopolistic competition may be offset by the fact that
96. Keely says that he’s glad that his morning coffee is sold in a monopolistically
Keely buys, it suggests that he
97. Dequam likes product variety, while Natasha is most concerned about paying the
lowest price possible for a good. This suggests that
98. A significant benefit of monopolistic competition compared with pure competition is
13–52
Copyright © 2018 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior
written consent of McGraw-Hill Education.
AACSB: Reflective Thinking
A c c e s s i b i l i t y :
Keyboard Navigation
Blooms: Understand
Difficulty:
02 Medium
Learning Objective: 13–04 Relate how the ability of monopolistic competition to deliver
product differentiation helps to compensate for its failure to deliver economic efficiency.
Test Bank: I
Topic:
Product Variety
99. Product variety is likely to be greater in
100. Which of the following statements is correct?
101. Which of the following is correct?
13–53
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written consent of McGraw-Hill Education.
A. The excess capacity problem diminishes as the monopolistically competitive firm’s
demand curve becomes less elastic.
B. The excess capacity problem means that monopolistically competitive firms typically
produce at some point on the rising segment of their average total cost curve.
C. The greater the degree of product variation, the lesser is the excess capacity problem.
D.
The greater the degree of product variation, the greater is the excess capacity problem.
102. In monopolistically competitive markets, resources are
103. In long–run equilibrium, a monopolistically competitive producer achieves
13–54
Copyright © 2018 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior
written consent of McGraw-Hill Education.
productive nor allocative efficiency.
Test Bank: I
Topic:
Monopolistic Competition and Efficiency
104. The less elastic a monopolistic competitor’s long-run demand curve, the
105. The more elastic a monopolistic competitor‘s long-run demand curve, the
106. (Consider This) The main point of the 1987 Wendy’s commercial depicting a
Soviet fashion show was to
13–55
Copyright © 2018 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior
written consent of McGraw-Hill Education.
AACSB: Reflective Thinking
A c c e s s i b i l i t y :
Keyboard Navigation
Blooms: Understand
Difficulty:
02 Medium
Learning Objective: 13–04 Relate how the ability of monopolistic competition to deliver
product differentiation helps to compensate for its failure to deliver economic efficiency.
Test Bank: I
Topic:
Product Variety
107. (Consider This) Which of the following statements is most accurate about the
difference between goods produced under the old central planning model of the Soviet
Union versus those produced by American capitalism?
108. (Consider This) In Wendy’s 1987 commercial depicting a Soviet fashion show,
one objective was to portray McDonald’s and Burger King products as
13–56
Copyright © 2018 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior
written consent of McGraw-Hill Education.
Learning Objective: 13–04 Relate how the ability of monopolistic competition to deliver
product differentiation helps to compensate for its failure to deliver economic efficiency.
Test Bank: I
Topic:
Product Variety
109. (Last Word) Raising the minimum wage in the restaurant industry
110. (Last Word) Which of the following best explains why an increase in the minimum
wage is more problematic for mom and pop restaurants than for big chain restaurants?
111. (Last Word) If the minimum wage in the restaurant industry increases over time,
eventually we would expect
13–57
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written consent of McGraw-Hill Education.
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.
True / False Questions
112. In the long run, monopolistically competitive firms make normal profits because they
are forced to operate at the minimum point on their average total cost curve.
113. The monopolistically competitive seller maximizes profits by equating price and
marginal cost.
13–58
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written consent of McGraw-Hill Education.
Topic:
Price and Output in Monopolistic Competition
114. Monopolistically competitive firms are inefficient because they produce at a point on
the rising segment of their average cost curves.
115. The demand curve of a monopolistically competitive producer is less elastic than that
of a purely competitive producer.
116. The larger the number of firms and the less the degree of product differentiation, the
greater will be the elasticity of a monopolistically competitive seller’s demand curve.
117. The economic profits earned by monopolistically competitive sellers are zero in the
long run.
118. The excess capacity problem associated with monopolistic competition implies that
fewer firms could produce the same industry output at a lower total cost.
119. The demand curve of a monopolistically competitive firm is more elastic than that of
a pure monopolist.
120. Monopolistically competitive sellers realize economic profits in the long run because
entry barriers are significant.
121. Monopolistically competitive sellers produce efficiently because they obtain only
normal profits in the long run.
122. Two industries that have the same four-firm concentration ratio can have significantly
different Herfindahl indexes.
123. The highest possible value of the Herfindahl index is 1,000.