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Accessibility:
Keyboard Navigation
Blooms: Remember
Diffi cult y:
01 Easy
Learning Objective: 13–01 List the characteristics of monopolistic competition.
Test Bank: I
Topic:
Monopolistic Competition
Multiple Choice Questions
124. Which of the following is a characteristic of monopolistic competition?
125. A monopolistically competitive industry is like a purely competitive industry in that
126. Which of the following assumptions is part of the model of monopolistic competition?
127. Monopolistic competition is characterized by firms
128. Which of the following characteristics provide a monopolistically competitive firm
some monopoly power?
129. In which industry is monopolistic competition most likely to be found?
13–63
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written consent of McGraw-Hill Education.
C.
retail trade
D. mining
130. One difference between monopolistic competition and pure competition is that
131. For which market model can we not assume a homogeneous product?
132. Which set of characteristics below best describes the basic features of monopolistic
competition?
13–64
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written consent of McGraw-Hill Education.
A. easy entry, many firms, and standardized products
B. barriers to entry, few firms, and differentiated products
C.
easy entry, many firms, and differentiated products
D. easy entry, few firms, and standardized products
133. The goal of product differentiation and advertising in monopolistic competition is to
make
134. Which industry would be best characterized as monopolistically competitive?
135. The following pairs of products illustrate product differentiation, except
136. Which of the following is a measure of the degree of industry concentration?
137. The following are the respective numbers for the four-firm concentration ratio and
Herfindahl index in an industry. Which set of numbers would suggest that the industry was
monopolistically competitive?
13–66
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written consent of McGraw-Hill Education.
Test Bank: II
Topic:
Monopolistic Competition
138. Monopolistically competitive firms are similar to monopolies in that they have
139. Demand and marginal revenue curves are downward-sloping for monopolistically
competitive firms because
140. The downward-sloping demand curve of a monopolistic competitor
13–67
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written consent of McGraw-Hill Education.
A c c e s s i b i l i t y :
Keyboard Navigation
Blooms: Understand
Difficulty:
02 Medium
Learning Objective: 13–02 Explain why monopolistic competitors earn only a normal
profit in the long run.
Test Bank: II
Topic:
Price and Output in Monopolistic Competition
141. The monopolistically competitive seller’s demand curve will become more elastic the
142. The demand curve faced by a monopolistically competitive firm
143. In monopolistic competition, which of the following would make an individual firm’s
demand curve less elastic?
13–68
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written consent of McGraw-Hill Education.
B. an increase in the price of the firm’s product
C.
increased brand loyalty toward the firm’s product
D. an increase in the number of rival firms
144.
Refer to the above graph for a monopolistically competitive firm. A successful advertising
campaign by the firm will cause its demand curve to shift from
13–69
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written consent of McGraw-Hill Education.
Learning Objective: 13–02 Explain why monopolistic competitors earn only a normal
profit in the long run.
Test Bank: II
Topic:
Price and Output in Monopolistic Competition
145. A monopolistically competitive firm is producing at an output level in the short run
where average total cost is $4.50, price is $4.00, marginal revenue is $2.50, and marginal
cost is $2.50. This firm is operating
146.
The graph depicts a monopolistically competitive firm.
13–70
In the short run, this monopolistically competitive firm will set the price at
147.
The graph depicts a monopolistically competitive firm.
13–71
At the profit-maximizing level of short-run output, this monopolistically competitive firm
will be making a profit of
148.
The graph depicts a monopolistically competitive firm.
This monopolistically competitive firm is earning economic profits in the short run and
149. A monopolistically competitive firm is producing at a short-run output level where
average total cost is $10.00, marginal cost is $5.00, marginal revenue is $6.00, and price is
$12.00. In the short run, the firm should
13–73
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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: 13–02 Explain why monopolistic competitors earn only a normal
profit in the long run.
Test Bank: II
Topic:
Price and Output in Monopolistic Competition
150. A monopolistically competitive firm is operating at a short-run level of output where
price is $21, average total cost is $15, marginal cost is $13, and marginal revenue is $13.
In the short run this firm should
151.
Answer the question based on the demand and cost schedules for a monopolistically
competitive firm given in the table below.
Price
Quantity
Demanded
Total
Cost
Output
$20
1
$10
1
18
2
20
2
16
3
29
3
14
4
36
4
12
5
40
5
10
6
42
6
What output quantity will the monopolistically competitive firm produce to maximize
profits?
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written consent of McGraw-Hill Education.
B. 3
C.
5
D. 6
152. Answer the question based on the demand and cost schedules for a monopolistically
competitive firm given in the table below.
Price
Quantity
Demanded
Total
Cost
Output
$20
1
$10
1
18
2
20
2
16
3
29
3
14
4
36
4
12
5
40
5
10
6
42
6
What will be the economic profit or loss for this monopolistically competitive firm at the
profit-maximizing level of output?
153.
Answer the question based on the demand and cost schedules for a monopolistically
competitive firm given in the table below.
Price
Quantity
Demanded
Total
Cost
Output
$20
1
$10
1
18
2
20
2
16
3
29
3
14
4
36
4
12
5
40
5
10
6
42
6
At the profit-maximizing level of output, marginal revenue is
154. In monopolistic competition, a firm has a limited degree of “price-making” ability.
This means that the profit-maximizing firm will
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written consent of McGraw-Hill Education.
Topic:
Price and Output in Monopolistic Competition
155. Assume that in a monopolistically competitive industry, firms are earning economic
profit. This situation will
156. 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
157. 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
shift
158.
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
13–78
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written consent of McGraw-Hill Education.
Test Bank: II
Topic:
Price and Output in Monopolistic Competition
159.
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
160. Answer the question on the basis of the following demand and cost data for a specific
firm.
Demand Data
Cost Data
13–79
(1)
Price
(2)
Price
(3)
Quantit
y
Total
Output
Total
Cost
$50
$35
2
2
$45
45
30
3
3
55
40
25
4
4
70
35
20
5
5
90
30
15
6
6
115
25
10
7
7
145
20
5
8
8
180
If columns 1 and 3 are this firm‘s demand schedule, the profit-maximizing level of output
will be
161.
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
Total
Output
Total
Cost
$50
$35
2
2
$45
45
30
3
3
55
40
25
4
4
70
35
20
5
5
90
30
15
6
6
115
25
10
7
7
145
20
5
8
8
180
If columns 1 and 3 are this firm’s demand schedule, maximum economic profit will be
162.
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
Total
Output
Total
Cost
$50
$35
2
2
$45
45
30
3
3
55
40
25
4
4
70
35
20
5
5
90
30
15
6
6
115
25
10
7
7
145
20
5
8
8
180
Suppose that entry of firms into the industry changes this firm‘s demand schedule from
columns 1 and 3 to columns 2 and 3. Maximum economic profit will