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Some factors that allow firms to make economic profits are beyond its control.All but one of the following is an uncontrollable factor.Which factor is controllable?


A) input prices
B) consumer tastes
C) chance events
D) product differentiation

E) C) and D)
F) A) and B)

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A profit-maximising monopolistically competitive firm produces and sells an allocatively efficient quantity of output.

A) True
B) False

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What are the most important differences between perfectly competitive markets and monopolistically competitive markets?

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In both perfectly competitive and monopo...

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Monopolistically competitive firms face a perfectly elastic demand curve.

A) True
B) False

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Which of the following statements is true about advertising by a monopolistically competitive firm?


A) Since the monopolistic competitor,like the perfect competitor,makes zero profit in the long run,it is a waste of resources to advertise its products.
B) Advertising could make the monopolistic competitor's demand more inelastic,but advertising has no effect on a perfect competitor's demand.
C) Advertising will be more beneficial if a monopolistic competitor colludes with other firms to advertise the products of the industry as a whole rather than an individual firm's product.
D) Monopolistically competitive firms tend to shun advertising because advertising draws attention to the variety of differentiated products available in the industry.

E) None of the above
F) All of the above

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Consumers benefit from monopolistic competition by


A) being able to choose from products more closely suited to their tastes.
B) paying the lowest possible price for the product.
C) paying the same price as everyone else.
D) being able to purchase high-quality products at low prices.

E) None of the above
F) C) and D)

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In the long run,if the demand curve of a monopolistically competitive firm is tangent to its average total cost curve,then


A) the firm would break even.
B) the firm would shut down temporarily.
C) the firm would earn enough revenue to cover its variable costs,but not its fixed costs.
D) the firm would earn an economic profit.

E) C) and D)
F) A) and B)

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Every firm that has the ability to affect the price of the good or service it sells will


A) have a perfectly elastic demand curve.
B) have a marginal revenue curve that lies below its demand curve.
C) earn a short-run profit but break even in the long run.
D) shut down in the short run.

E) A) and B)
F) A) and C)

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Which of the following is not an example of a monopolistically competitive market?


A) automobile producers
B) supermarkets
C) video stores
D) makers of women's clothing

E) A) and C)
F) All of the above

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Economists have long debated whether there is a significant loss of well-being to society in markets that are monopolistically competitive rather than perfectly competitive.Which of the following offers the best reason why some economists believe that monopolistically competitive markets are less efficient than perfectly competitive markets?


A) In contrast to perfectly competitive markets,neither allocative efficiency nor productive efficiency are achieved in monopolistically competitive markets.
B) In contrast to perfectly competitive markets,firms in monopolistically competitive markets earn economic profits in long-run equilibrium.
C) In contrast to perfectly competitive markets,firms in monopolistically competitive markets do not produce where price equals average total cost in long-run equilibrium.
D) In contrast to perfectly competitive markets,firms in monopolistically competitive markets can charge a price greater than average total cost in the short run.

E) A) and C)
F) B) and C)

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Figure 10-3 Figure 10-3 -Refer to Figure 10-3.What is the marginal revenue of the sixth unit of output? A) $4 B) $5 C) $9 D) $54 -Refer to Figure 10-3.What is the marginal revenue of the sixth unit of output?


A) $4
B) $5
C) $9
D) $54

E) C) and D)
F) B) and D)

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In what way does long-run equilibrium under monopolistic competition differ from long-run equilibrium under perfect competition?


A) Firms in perfect competition achieve productive and allocative efficiency while firms in monopolistic competition achieve neither allocative nor productive efficiency.
B) The only difference is that in a monopolistically competitive market there are many brands to choose from while in a perfectly competitive market there is one standard product.
C) Firms in perfect competition achieve productive efficiency while firms in monopolistic competition achieve allocative efficiency.
D) Firms in perfect competition achieve allocative efficiency while firms in monopolistic competition achieve brand efficiency.

E) A) and C)
F) None of the above

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Explain the differences between total revenue,average revenue,and marginal revenue.

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Total revenue equals price × q...

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Why are demand and marginal revenue represented by the same curve for a firm in a perfectly competitive market,but by separate curves for a firm in a monopolistically competitive market?

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A perfectly competitive firm faces a hor...

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Figure 10-12 Figure 10-12 -Refer to Figure 10-12.The firm represented in the diagram A) makes zero economic profit. B) makes zero accounting profit. C) should exit the industry. D) should expand its output to take advantage of economies of scale. -Refer to Figure 10-12.The firm represented in the diagram


A) makes zero economic profit.
B) makes zero accounting profit.
C) should exit the industry.
D) should expand its output to take advantage of economies of scale.

E) B) and C)
F) A) and D)

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If some monopolistically competitive firms exit their market after suffering short-run losses,the demand curves of remaining firms will shift to the right.

A) True
B) False

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Figure 10-13 Figure 10-13 Figure 10-13 shows short-run cost and demand curves for a monopolistically competitive firm in the market for designer watches. -Refer to Figure 10-13.If the diagram represents a typical firm in the designer watch market,what is likely to happen in the long run? A) Some firms will exit the market causing the demand to increase for firms remaining in the market. B) The firms that are incurring losses will be purchased by their more successful rivals. C) Inefficient firms will exit the market,and new cost efficient firms will enter the market. D) Firms will have to raise their prices to cover costs of production. Figure 10-13 shows short-run cost and demand curves for a monopolistically competitive firm in the market for designer watches. -Refer to Figure 10-13.If the diagram represents a typical firm in the designer watch market,what is likely to happen in the long run?


A) Some firms will exit the market causing the demand to increase for firms remaining in the market.
B) The firms that are incurring losses will be purchased by their more successful rivals.
C) Inefficient firms will exit the market,and new cost efficient firms will enter the market.
D) Firms will have to raise their prices to cover costs of production.

E) A) and D)
F) A) and B)

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New firms are able to enter monopolistically competitive markets because there are low barriers to entry.

A) True
B) False

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Figure 10-10 Figure 10-10 Figure 10-10 shows cost and demand curves for a monopolistically competitive producer of iced tea. -Refer to Figure 10-10.to answer the following questions. a.What is the profit-maximising output level? b.What is the profit-maximising price? c.At the profit-maximising output level,how much profit will be realised? d.Does this graph most likely represent the long run or the short run? Why? Figure 10-10 shows cost and demand curves for a monopolistically competitive producer of iced tea. -Refer to Figure 10-10.to answer the following questions. a.What is the profit-maximising output level? b.What is the profit-maximising price? c.At the profit-maximising output level,how much profit will be realised? d.Does this graph most likely represent the long run or the short run? Why?

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a.The profit-maximising output...

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What are the key factors that determine the profitability of a firm in a monopolistically competitive market?

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A monopolistically competitive firm's pr...

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