Question 1

A monopolistically competitive firm confronts a downward-sloping demand curve and as a result has some market power.

Accepted Answer

A) True 
 B)False

Question 2

The cross-price elasticity of demand for the products of monopolistically competitive firms is

Accepted Answer

A)   Very high.
B)   Low.
C)   An indication that most of the products are complementary goods.
D)   The same as in perfect competition.E) B) and C)
F) B) and D)

Question 3

A major difference between oligopoly and monopolistic competition is that monopolistically competitive firms and oligopolies do not

Accepted Answer

A)   Have high concentration ratios.
B)   Have many competitors.
C)   Have high barriers to entry.
D)   Confront a downward-sloping demand curve.E) C) and D)
F) B) and C)

Question 4

An In the News article titled "Water, Water Everywhere" refers to the use of advertising. Successful advertising can do all of the following except

Accepted Answer

A)   Differentiate products.
B)   Create brand loyalty.
C)   Decrease the price elasticity of demand for the product.
D)   Maximize efficiency.E) B) and C)
F) A) and D) D

Question 5

Which of the following real-world situations is the result of excess capacity in a monopolistically competitive market?

Accepted Answer

A)   A factory producing women's clothing produces more than it can sell during a season.
B)   Gas stations with infrequently used pumps are located at all four corners of an intersection.
C)   A retail auto tire store orders too much inventory.
D)   Monopolistically competitive firms do not exist in the real world.E) None of the above
F) C) and D)

Question 6

Imperfectly competitive firms engage in nonprice competition.

Accepted Answer

A) True 
 B)False

Question 7

The monopoly aspect of monopolistic competition is that there is only one seller.

Accepted Answer

A) True 
 B)False

Question 8

Which of the following is not an example of nonprice competition in the airline market?

Accepted Answer

A)   A low concentration ratio.
B)   Advertising on the radio.
C)   More on-time flights.
D)   Increased frequency of flights.E) A) and B)
F) None of the above

Question 9

An In the News article titled "Water, Water Everywhere" refers to the use of advertising. When a firm successfully advertises its product, the firm

Accepted Answer

A)   Has more control over its price.
B)   Has less control over its price.
C)   Still has no control over its price because all firms are price takers.
D)   Has total control over its price.E) None of the above
F) B) and D)

Question 10

The main difference between perfect competition and monopolistic competition is

Accepted Answer

A)   The degree of product differentiation.
B)   The long-run economic profits that are expected.
C)   The number of firms in the market.
D)   The ease of entry and exit.E) B) and C)
F) A) and D)

Question 11

A World View article titled "The Best Global Brands" discusses the value of brand names. In 2008 which of the following was the most valuable brand name?

Accepted Answer

A)   Coca-Cola.
B)   Google.
C)   Intel.
D)   McDonalds.E) B) and D)
F) C) and D)

Question 12

In a monopolistically competitive market with negative economic profits,

Accepted Answer

A)   Firms will enter until accounting profits are zero.
B)   Firms will enter until economic profits are zero.
C)   Firms will exit until economic profits are zero.
D)   No entry or exit will occur.E) A) and C)
F) C) and D) C

Question 13

Which of the following market structures will have only normal profit in the long run?

Accepted Answer

A)   Monopoly.
B)   Duopoly.
C)   Monopolistic competition.
D)   Oligopoly.E) A) and B)
F) C) and D)

Question 14

Which type of firm engages in nonprice competition?

Accepted Answer

A)   Monopolistically competitive firms.
B)   Perfectly competitive firms.
C)   Price takers.
D)   Extremely efficient firms.E) A) and B)
F) A) and C)

Question 15

Which firm in Figure 26.5 is using marginal cost pricing?

Accepted Answer

A)   Firms B and D only.
B)   Firm B only.
C)   Firm C only.
D)   All of the firms are using marginal cost pricing.E) None of the above
F) A) and B) B

Question 16

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

Accepted Answer

A)   Losing sales to its competitors and therefore needed higher prices to maintain revenue.
B)   Relying on the economy to improve in order to offset the loss in sales as a result of the price hikes.
C)   Relying on brand loyalty to prevent a significant loss in sales.
D)   Relying on very elastic demand.E) B) and C)
F) None of the above

Question 17

The monopolistically competitive firm earns zero economic profit in the long run.

Accepted Answer

A) True 
 B)False

Question 18

A major difference between monopoly and monopolistic competition is

Accepted Answer

A)   One maximizes profits by setting MR equal to MC, and the other does not.
B)   The number of firms in the market.
C)   One type of firm has market power, and the other does not.
D)   One has a downward-sloping demand curve, and the other does not.E) A) and B)
F) C) and D)

Question 19

For which of the following market structures will the firm's demand curve be tangent to the ATC curve in the long run?

Accepted Answer

A)   Duopoly.
B)   Monopolistic competition.
C)   Oligopoly.
D)   Monopoly.E) B) and D)
F) A) and D)

Question 20

Product differentiation occurs when

Accepted Answer

A)   A completely new process is used to produce a familiar product.
B)   One firm produces many varieties of a product.
C)   Buyers perceive differences in the products of several companies.
D)   Sellers perceive differences in the products of several companies.E) B) and C)
F) A) and D)

Exam 12: Deficits and Debt

A monopolistically competitive firm confronts a downward-sloping demand curve and as a result has some market power.

Correct AnswerverifiedShow Answer

The cross-price elasticity of demand for the products of monopolistically competitive firms is

Correct AnswerverifiedShow Answer

A major difference between oligopoly and monopolistic competition is that monopolistically competitive firms and oligopolies do not

Correct AnswerverifiedShow Answer

An In the News article titled "Water, Water Everywhere" refers to the use of advertising. Successful advertising can do all of the following except

Correct AnswerverifiedD

Which of the following real-world situations is the result of excess capacity in a monopolistically competitive market?

Correct AnswerverifiedShow Answer

Imperfectly competitive firms engage in nonprice competition.

Correct AnswerverifiedShow Answer

The monopoly aspect of monopolistic competition is that there is only one seller.

Correct AnswerverifiedShow Answer

Which of the following is not an example of nonprice competition in the airline market?

Correct AnswerverifiedShow Answer

An In the News article titled "Water, Water Everywhere" refers to the use of advertising. When a firm successfully advertises its product, the firm

Correct AnswerverifiedShow Answer

The main difference between perfect competition and monopolistic competition is

Correct AnswerverifiedShow Answer

A World View article titled "The Best Global Brands" discusses the value of brand names. In 2008 which of the following was the most valuable brand name?

Correct AnswerverifiedShow Answer

In a monopolistically competitive market with negative economic profits,

Correct AnswerverifiedC

Which of the following market structures will have only normal profit in the long run?

Correct AnswerverifiedShow Answer

Which type of firm engages in nonprice competition?

Correct AnswerverifiedShow Answer

Which firm in Figure 26.5 is using marginal cost pricing?

Correct AnswerverifiedB

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

Correct AnswerverifiedShow Answer

The monopolistically competitive firm earns zero economic profit in the long run.

Correct AnswerverifiedShow Answer

A major difference between monopoly and monopolistic competition is

Correct AnswerverifiedShow Answer

For which of the following market structures will the firm's demand curve be tangent to the ATC curve in the long run?

Correct AnswerverifiedShow Answer

Product differentiation occurs when

Correct AnswerverifiedShow Answer

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D

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C

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B

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