90.
Which firm in Figure 26.5 is using marginal cost pricing?
91.
Which firm in Figure 26.5 is producing at the output level that maximizes production efficiency?
92.
Which firm in Figure 26.5 is most likely a monopolistically competitive firm in the long run?
93.
Which of the firms in Figure 26.5 is most likely a monopoly?
94. Which type of firm engages in nonprice competition?
95. In monopolistic competition, a firm
96. All of the following are examples of nonprice competition except
nonprice competition.
97. Which of the following is true about advertising?
98. Which of the following is not true about advertising?
A. It creates brand loyalty.
99. Which of the following is not an example of nonprice competition in the airline market?
A. A low concentration ratio.
100. Nonprice competition results in
101. An In the News article titled “Selling “Pure Water”: A $Billion Scam?” refers to the use of advertising.
Successful advertising can do all of the following except
A. Differentiate products.
102. An In the News article titled “Selling “Pure Water”: A $Billion Scam?” refers to the use of advertising. When a
firm successfully advertises its product, the price elasticity of demand becomes
103. AnIn the News article titled “Selling “Pure Water”: A $Billion Scam?” refers to the use of advertising. When
a firm successfully advertises its product, the firm
104. One In the News article is titled “The Cola Wars: It’s Not All Taste.” Firms in a monopolistically competitive
industry, such as the soft drink market, are likely to
105. One In the News article is titled “The Cola Wars: It’s Not All Taste.” Firms in a monopolistically competitive
industry, such as the soft drink market, are likely to advertise in an attempt to
106. A World View article titled “The Best Global Brands” discusses the value of brand names. Establishing brand
loyalty can do all of the following except
A. Improve resource allocation efficiency.
107. According to the article “What’s Behind Starbucks’Price Hike?” in October 2006, Starbucks raised the price
of its lattes, cappuccinos, drip coffee, and other drinks because of increases in wages and fuel costs. When it
chose to hike prices, Starbucks was
A. Losing sales to its competitors and therefore needed higher prices to maintain revenue.
108. According to the article “What’s Behind Starbucks’Price Hike,” Starbucks raised prices due to
A. Lack of competition.
109. According to “Fast-Food Rivals Suit Up for Breakfast War,” what are companies like Starbucks, McDonalds,
Wendy’s, and Burger King trying to accomplish by entering the hot breakfast arena?
110. The article titled “Premium Coffee Shops May Be Nearing Saturation Point” describes an area that has at least
eight coffee shops within a two-mile radius. This is most likely an example of
111. A World View article titled “The Best Global Brands” discusses the value of brand names. In 2014 which of the
following was the most valuable brand name?
A. Apple.
Topic: WORLD VIEW
112. Concentration ratios for monopolistically competitive markets typically fall in the range of 70 to 100 percent.
113. The combined market share for the top four firms in a monopolistically competitive industry will typically be in
the range of 20 to 40 percent.
114. Low concentration ratios are typical of monopolistic competition.
115. A distinguishing characteristic of monopolistic competition is that there are many firms in an industry.
116. In monopolistic competition, if a firm makes modest changes in its price or output, it will influence the market
shares of other firms in the market.
117. In monopolistic competition, modest changes in the output or price of any single firm will have no
significant influence on the sales of other firms.
TRUE
118. In monopolistic competition, no buyer or seller has any control over the market price of a good.
119. A monopolistically competitive firm confronts a downward-sloping demand curve and as a result has
some market power.
120. Firms in a monopolistically competitive market make independent production decisions.
121. The monopoly aspect of monopolistic competition is that there is only one seller.
122. In monopolistic competition, each firm competes with other firms offering identical substitutes.
123. In monopolistically competitive markets, product differentiation is a significant barrier to entry.
124. Cross-price elasticity is very low in monopolistic competition.
125. Brand loyalty makes the demand curve facing the monopolistically competitive firm less price–elastic.
126. Monopolistically competitive firms want to behave like a cartel, choosing a rate of output that maximizes
total profit for all of the firms in the market.
127. Modest shifts of the market marginal cost curve will have no impact on the production decision of a
monopolistically competitive firm.
128. For a monopolistically competitive firm, barriers to entry are high, which allows the firm to earn positive
economic profits in the long run.
129. When firms enter a monopolistically competitive industry, the industry cost curves shift to the right.
130. As new firms enter a monopolistically competitive industry, the demand curve for an individual firm shifts to the
right.
131. The monopolistically competitive firm earns zero economic profit in the long run.
132. Monopolistic competition results in allocative efficiency.
133. One symptom of the inefficiencies associated with monopolistic competition is industrywide excess capacity.
134. Monopolistically competitive firms use marginal cost pricing.
135. Marginal cost pricing means that goods are offered for sale at prices equal to their marginal cost.
136. Price reductions are often used as an effective way to increase sales in monopolistic competition.
137. Imperfectly competitive firms engage in nonprice competition.
138. If a monopolistic competitor lowers its price, it will attract a significant number of new customers.
139. Advertising plays a role in reducing the cross-price elasticity of demand.
140. Monopolistically competitive firms advertise to differentiate their product from those of competitors.
141. A monopolistically competitive firm that runs a successful advertising campaign creates enormous goodwill, but
this goodwill does little to increase the value of the company.
142. A successful advertising campaign alters the demand curve and the supply curve facing the firm.
143. In 2008 Coca-Cola was the most valuable brand name.
144. A monopolistically competitive firm maximizes profits in the short run and long run at an output level where
marginal revenue equals marginal costs.
TRUE
145. Describe the characteristics of a monopolistically competitive industry.
146. Describe why monopolistically competitive firms find it important to establish brand loyalty.
147. Describe the typical demand curve facing an individual firm in perfectly competitive, monopoly, and
monopolistically competitive markets. Explain what the shape of each firm’s demand curve indicates about
the amount of market power each firm possesses.
148. If monopolistically competitive firms have some control over the prices they charge, why do they
experience zero economic profits in the long run?
149. Economists say that excess capacity in monopolistically competitive markets is “the cost to society of variety.”
What is the cost that economists are talking about, and why is this cost the result of having a variety of goods
and services?
150. Discuss both the price elasticity of demand and the cross-price elasticity of demand conditions facing a firm
in a monopolistically competitive industry. Include in your essay the role of advertising and the creation of
brand loyalty.
Chapter 12 Test Bank Summary
Category
# of Questions
AACSB: Analytic
66
AACSB: Reflective Thinking
84
Accessibility: Keyboard Navigation
119
Blooms: Analyze
46
Blooms: Apply
20
Blooms: Create
11
Blooms: Remember
39
Blooms: Understand
34
Difficulty: 01 Easy
39
Difficulty: 02 Medium
36
Difficulty: 03 Hard
75
Learning Objective: 12-01 The unique structure of monopolistic competition.
85
Learning Objective: 12-02 The unique behavior of monopolistically competitive firms.
34
Learning Objective: 12-03 How monopolistically competitive firms maximize profits.
15
Learning Objective: 12-04 Why economic profits tend toward zero in monopolistic competition.
16
Topic: BEHAVIOR
100
Topic: IN THE NEWS
9
Topic: STRUCTURE
31
Topic: THE ECONOMY TOMORROW
7
Topic: WORLD VIEW
3