Monopolistic Competition 4041
107. Refer to Figure 16–10. If the firm were to produce 154.92 units of output,
a. efficient scale would be realized.
b. ATC would be at its minimum value.
c. the firm would sustain a loss of more than $2,000.
d. All of the above are correct.
Figure 16-11
108. Refer to Figure 16–11. The profit for this firm is
a. $375.
b. $500.
c. $1000.
d. $1250.
4042 Monopolistic Competition
109. Refer to Figure 16-11. How much consumer surplus will be derived from the purchase of this
product at the monopolistically competitive price?
a. $250.
b. $500
c. $562.50.
d. $1250.
110. Refer to Figure 16–11. The graph depicts a monopolistically competitive firm in the short run.
Which of the following explanations best describes the long run adjustment?
a. More firms will enter this market and each firm will have a smaller share of the total market
demand, shifting this firm’s demand curve to the left.
b. More firms will enter this market and each firm will have a larger share of the total market
demand, shifting this firm’s demand to the right.
c. Firms will exit this market and each firm will have a smaller share of the total market demand,
shifting this firm’s demand to the left.
d. Firms will exit this market and each firm will have a larger share of the total market demand,
shifting this firm’s demand to the right.
Monopolistic Competition 4043
Figure 16-12
111. Refer to Figure 16–12. What is the efficient scale of production?
a. This firm cannot produce efficiently.
b. 12 units
c. 22 units
d. 28 units
112. Refer to Figure 16–12. How much cost per unit could this firm save by producing the efficient
level of output rather than the profit-maximizing level of output?
a. $0
b. $1
c. $2
d. $3
4044 Monopolistic Competition
Table 16-4
This table shows the demand schedule, marginal cost, and average total cost for a
monopolistically competitive firm.
Quantity
Price
Marginal Cost
Average Total Cost
0
$50
—
—
1
$45
$30
$40
2
$40
$24
$32
3
$35
$14
$26
4
$30
$10
$22
5
$25
$12
$20
6
$20
$32
$22
7
$15
$50
$26
8
$10
$74
$32
9
$5
$104
$40
10
$0
$140
$50
113. Refer to Table 16-4. What price will this firm charge to maximize profit?
a. $25
b. $30
c. $35
d. $40
Monopolistic Competition 4045
114. Refer to Table 16-4. What is this firm’s profit-maximizing level of output?
a. 0 units of output
b. 3 units of output
c. 4 units of output
d. 5 units of output
115. Refer to Table 16-4. At the profit–maximizing level of output, what is this firm’s total cost?
a. $10
b. $40
c. $88
d. $100
4046 Monopolistic Competition
116. Refer to Table 16-4. Which of the following is likely to happen in the long run in this market?
a. The market is currently in a long-run equilibrium.
b. The market price is likely to rise.
c. Firms are likely to enter the market since firms are earning a positive economic profit.
d. Firms are likely to leave the market since firms are earning a negative economic profit.
117. Refer to Table 16–4. How much profit will this firm earn when it chooses its output to
maximize profit?
a. a $12 loss
b. an $8 profit
c. a $25 profit
d. a $32 profit
Monopolistic Competition 4047
118. Refer to Table 16–4. If the government forces this firm to produce at its efficient output level,
how much output will this firm produce?
a. 0 units of output
b. 3 units of output
c. 4 units of output
d. 5 units of output
119. Refer to Table 16–4. If the government forces this firm to produce at its efficient output level,
how much profit will this firm earn?
a. a $12 loss
b. a $13 profit
c. a $25 profit
d. a $32 profit
4048 Monopolistic Competition
Table 16-5
This table shows the demand schedule, marginal cost, and average total cost for a
monopolistically competitive firm.
Quantity
Price
Average Total Cost
0
$30
—
1
$24
$32
2
$18
$18
3
$12
$14
4
$6
$10
5
$0
$10
120. Refer to Table 16-5. What price should this firm charge to maximize profit?
a. $6
b. $12
c. $18
d. $24
121. Refer to Table 16-5. What is this firm’s total cost at the profit-maximizing quantity?
a. $12
b. $18
c. $32
d. $36
Monopolistic Competition 4049
122. Refer to Table 16-5. How much profit will this firm earn at the monopolistically competitive
price?
a. $0
b. $5
c. $12
d. $16
123. Refer to Table 16-5. Which of the following statements regarding this monopolistically
competitive firm is correct?
a. New firms will enter this market in the long run since firm profits are greater than zero.
b. Firms will leave this market in the long run since firm profits are less than zero.
c. This firm is currently in long-run equilibrium.
d. This firm is currently in long-run equilibrium, and the firm is producing its efficient scale of
output.
4050 Monopolistic Competition
Table 16-6
Beatrice’s Birthday Cakes is one bakery among many in the market for birthday cakes. The
following table presents cost and revenue data for birthday cakes at Beatrice’s.
COSTS
REVENUES
Quantity
Produced
Total Cost
Marginal
Cost
Quantity
Demanded
Total
Revenue
Marginal
Revenue
0
$25
—
0
$60
—
1
$28
1
$54
2
$32
2
$48
3
$37
3
$42
4
$43
4
$36
5
$50
5
$30
6
$58
6
$24
7
$67
7
$18
8
$77
8
$12
124. Refer to Table 16-6. What is the profit-maximizing output for Beatrice’s Birthday Cakes?
a. 3 cakes
b. 4 cakes
c. 5 cakes
d. 6 cakes
Monopolistic Competition 4051
125. Refer to Table 16–6. When maximizing profit, what price does Beatrice’s charge for a cake?
a. $24
b. $30
c. $36
d. $42
126. Refer to Table 16-6. At the profit-maximizing quantity, what is Beatrice’s total profit?
a. $43
b. $89
c. $101
d. $144
4052 Monopolistic Competition
127. Refer to Table 16–6. Given the cost and revenue data, Beatrice’s is
a. not in a long–run equilibrium. More businesses will enter the bakery market in the long-run.
b. not in a short–run equilibrium.
c. not in a long–run equilibrium. Some businesses currently in the bakery market will exit the
market in the long– run.
d. in a long-run equilibrium.
128. Refer to Table 16-6. If the government required Beatrice’s to produce at the efficient scale of
output, how many cakes would Beatrice’s sell?
a. 4
b. 5
c. 6
d. 7
Monopolistic Competition 4053
129. Refer to Table 16-6. If the government forced Beatrice’s to produce at the efficient scale of
output, what is the maximum profit Beatrice’s could earn?
a. $59
b. $67
c. $101
d. $126
130. Refer to Table 16-6. Suppose the government forced Beatrice’s to produce at the efficient
scale of output. Who would be better off as a result of this policy? Who would be worse off as a
result of this policy?
a. Beatrice’s would be better off; consumers would be worse off.
b. Consumers would be better off; Beatrice’s would be worse off.
c. No one would be better off; consumers would be worse off.
d. No one would be better off; no one would be worse off.
4054 Monopolistic Competition
Table 16-7
A monopolistically competitive firm faces the following demand schedule for its product. In
addition, the firm has total fixed costs equal to 20.
Price
Quantity
$30
1
$26
2
$22
3
$18
4
$14
5
$10
6
$6
7
131. Refer to Table 16-7. If the firm has a constant marginal cost of $7 per unit, how many units
should the firm produce to maximize profit?
a. 3 units
b. 4 units
c. 5 units
d. 6 units
Monopolistic Competition 4055
132. Refer to Table 16-7. If the firm has a constant marginal cost of $7 per unit, what price should
the firm charge to maximize profit?
a. $10
b. $14
c. $18
d. $22
133. Refer to Table 16-7. If the firm has a constant marginal cost of $7 per unit, how much profit
will the firm earn at the profit–maximizing level of output?
a. $24
b. $25
c. $41
d. $66
4056 Monopolistic Competition
134. Refer to Table 16-7. If the firm produces its profit–maximizing level of output and there is a
constant marginal cost of $7 per unit, which of the following is correct?
a. This firm is operating at its efficient scale.
b. This firm should expect its demand curve to shift to the left.
c. Firms will leave the market and profits for firms that remain in the market will rise.
d. This firm is in a long-run equilibrium.
Scenario 16-2
Suppose market demand for a product is given by the equation P = 20 – Q. For this market
demand curve, marginal revenue is MR = 20 – 2Q.
135. Refer to Scenario 16-2. If the marginal cost of producing this good is 0, what quantity would a
profit-maximizing monopolist produce?
a. Q = 0
b. Q = 2
c. Q = 5
d. Q = 10
Monopolistic Competition 4057
136. Refer to Scenario 16-2. If the marginal cost of producing this good is 4, what quantity would a
profit-maximizing monopolist produce?
a. Q = 2
b. Q = 4
c. Q = 6
d. Q = 8
137. Refer to Scenario 16-2. If the marginal cost of producing this good is 0, what price would a
profit-maximizing monopolist charge for the product?
a. P = 0
b. P = 5
c. P = 10
d. P = 20
4058 Monopolistic Competition
138. Refer to Scenario 16-2. If the marginal cost of producing this good is 4, what price would a
profit-maximizing monopolist charge for the product?
a. P = 4
b. P = 10
c. P = 12
d. P = 20
139. Refer to Scenario 16-2. If the marginal cost of producing this good is 0, how much total
consumer surplus would consumers receive in this market?
a. 10
b. 20
c. 50
d. 100
Monopolistic Competition 4059
140. Refer to Scenario 16-2. If the marginal cost of producing this good is 4, how much total
consumer surplus would consumers receive in this market?
a. 8
b. 12
c. 32
d. 64
Scenario 16-3
Peter operates an ice cream shop in the center of Fairfield. He sells several unusual flavors of
organic, homemade ice cream so he has a monopoly over his own ice cream, though he
competes with many other firms selling ice cream in Fairfield for the same customers. Peter’s
demand and cost values for sales per day are given in the table below. (Everyone who
purchases Peter’s ice cream buys a double scoop cone because it’s so delicious.)
Quantity
Price
MR
MC
ATC
20
$5.60
$5.20
$2.20
$2.05
40
$5.20
$4.40
$2.40
$2.10
60
$4.80
$3.60
$2.60
$2.15
80
$4.40
$2.80
$2.80
$2.20
100
$4.00
$2.00
$3.00
$2.25
120
$3.60
$1.20
$3.20
$2.30
140
$3.20
$0.40
$3.40
$2.35
160
$2.80
–$0.40
$3.60
$2.40
180
$2.40
–$1.20
$3.80
$2.45
4060 Monopolistic Competition
141. Refer to Scenario 16-3. How many double scoop ice cream cones should Peter sell per day to
maximize his profit?
a. 80
b. 100
c. 120
d. 140
142. Refer to Scenario 16-3. What price should Peter charge per double scoop ice cream cone to
maximize his profit?
a. $5.60
b. $4.40
c. $3.20
d. $2.40