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13-81
Copyright © 2018 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior
written consent of McGraw-Hill Education.
D. decrease to zero.
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: II
Topic:
Price and Output in Monopolistic Competition
163.
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
In the long run, the number of firms in this monopolistic competitive industry will most
likely
13-82
164.
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.
Cost Data
Demand Data
Total
Output
Total
Cost
Quantity
Demanded
Price
0
$25
0
$60
1
40
1
55
2
45
2
50
3
55
3
45
4
70
4
40
5
90
5
35
6
115
6
30
If the firm sells 3 units of output, marginal revenue will be
165.
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.
Cost Data
Demand Data
Total
Output
Total
Cost
Quantity
Demanded
Price
0
$25
0
$60
1
40
1
55
13-83
2
45
2
50
3
55
3
45
4
70
4
40
5
90
5
35
6
115
6
30
What output and price levels will maximize the firm's profit in the short run?
166.
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.
Cost Data
Demand Data
Total
Output
Total
Cost
Quantity
Demanded
Price
0
$25
0
$60
1
40
1
55
2
45
2
50
3
55
3
45
4
70
4
40
5
90
5
35
6
115
6
30
What will the maximum total profits be?
13-84
Copyright © 2018 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior
written consent of McGraw-Hill Education.
A. $65
B. $85
C.
$90
D. $110
167. In the long run, a representative firm in a monopolistically competitive industry will
end up
168. In the long run, the economic profits for a monopolistically competitive firm will be
13-85
Copyright © 2018 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior
written consent of McGraw-Hill Education.
Topic:
Price and Output in Monopolistic Competition
169. Which of the following forces does not play a major part in the adjustments of a
monopolistically competitive industry toward its long-run equilibrium?
170. Firms in an industry will not earn long-run economic profits if
171. Suppose some firms exit an industry characterized by monopolistic competition. We
would expect the demand curve of a firm already in the industry to
13-86
Copyright © 2018 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior
written consent of McGraw-Hill Education.
Accessibility:
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
172.
Refer to the above graphs. A short-run equilibrium that would produce profits for a
monopolistically competitive firm would be represented by graph
173.
Refer to the above graphs. A short-run equilibrium that would result in losses for a
monopolistically competitive firm would be represented by graph
174.
Refer to the above graphs. The long-run equilibrium for a monopolistically competitive
firm is represented by graph
175.
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
176.
Refer to the above graph for a representative firm in monopolistic competition in a
constant-cost industry. This firm is
177. The long-run equilibrium position of the monopolistically competitive firm occurs at a
point where average costs are
13-91
Copyright © 2018 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior
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
178. Which of the following statements is not true for a monopolistically competitive
industry?
179. Which statement concerning monopolistic competition is false?
180. In the long-run equilibrium of a monopolistically competitive industry,
13-92
Copyright © 2018 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior
written consent of McGraw-Hill Education.
B.
P > minimum ATC.
C. P = MC.
D. P < MC.
181. In long-run equilibrium, a profit-maximizing firm in a monopolistically competitive
industry will produce the quantity of output where
182.
Refer to the above graph of the representative firm in monopolistic competition. Marginal
revenue and marginal cost intersect at point
183.
Refer to the above graph of the representative firm in monopolistic competition. Point b
indicates
184. Monopolistic competition is characterized by excess capacity because
13-95
Copyright © 2018 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior
written consent of McGraw-Hill Education.
Blooms: Understand
Difficulty:
02 Medium
Learning Objective: 13-03 Explain why monopolistic competition delivers neither
productive nor allocative efficiency.
Test Bank: II
Topic:
Monopolistic Competition and Efficiency
185. Excess capacity implies
186. In monopolistic competition there is an underallocation of resources at the profit-
maximizing level of output, which means that
187. Monopolistic competitive firms are productively inefficient because production
occurs where
