Question 1

The demand curve for the product of a monopolistic competitor is

Accepted Answer

A)   downward sloping.
B)   horizontal.
C)   vertical.
D)   unitary elastic.E) B) and C)
F) A) and B)

Question 2

When a pharmaceutical company advertises that its allergy medication is clinically proven to alleviate hay fever symptoms, the pharmaceutical company is engaging in

Accepted Answer

A)   informational advertising.
B)   trademark protection.
C)   persuasive advertising.
D)   direct marketing.E) A) and B)
F) None of the above

Question 3

A distinguishing characteristic of producers of information products is their

Accepted Answer

A)   low fixed costs.
B)   short-run economies of operation.
C)   low average fixed costs.
D)   low overhead.E) C) and D)
F) B) and C)

Question 4

Judy has just looked through her favorite catalog that came in the mail and has placed an order. The catalog is an example of

Accepted Answer

A)   mass marketing.
B)   direct marketing.
C)   indirect marketing.
D)   interactive marketing.E) B) and D)
F) C) and D)

Question 5

A monopolistic competitor is in long-run equilibrium when

Accepted Answer

A)   economic profits are equal to zero and the average total cost curve is tangent to the demand curve.
B)   economic profits are equal to zero and the marginal cost curve is tangent to the demand curve.
C)   economic profits are greater than zero and the average total cost curve is tangent to the demand curve.
D)   economic profits are greater than zero and the marginal cost curve is tangent to the demand curve.E) C) and D)
F) A) and D)

Question 6

Which of the following is FALSE about a comparison between a perfectly competitive firm and a monopolistically competitive firm?

Accepted Answer

A)   A perfectly competitive firm has a horizontal demand curve, while a monopolistically competitive firm has a downward sloping demand curve.
B)   In the short run, a perfectly competitive firm will earn zero economic profits, while a monopolistically competitive firm will earn positive economic profits.
C)   Both the perfectly competitive and monopolistically competitive firm will earn economic profits equal to zero in the long-run.
D)   In the long run, the perfectly competitive firm will produce at the minimum of the average total cost curve, while the monopolistically competitive firm will produce to the left of the minimum of the average total cost curve.E) A) and C)
F) B) and D)

Question 7

In a monopolistically competitive market if the additional revenue generated from advertising equals the additional cost of advertising, the firm should

Accepted Answer

A)   advertise more to increase sales.
B)   advertise more to lower marginal costs.
C)   maintain its current amount of advertising.
D)   advertise less to decrease costs.E) B) and D)
F) A) and B)

Question 8

Which of the following is NOT a characteristic of the demand curve faced by a firm in a monopolistically competitive market?

Accepted Answer

A)   The demand curve is downward sloping.
B)   The slope of the demand curve is negative.
C)   The firm will produce where the demand curve is inelastic.
D)   The firm will produce where the demand curve is elastic.E) A) and C)
F) A) and B)

Question 9

A monopolistic competitor is like a competitive firm in the long run, because

Accepted Answer

A)   it earns positive economic profits.
B)   it earns zero economic profits
C)   both firms will earn positive economic profits.
D)   both firms will increase price to increase profits.E) None of the above
F) A) and B)

Question 10

-Refer to the above figure. Economic profits for this firm are

Accepted Answer

A)   negative.
B)   zero.
C)   positive.
D)   undetermined without more information.E) B) and C)
F) None of the above

Question 11

Which of the following statements about a monopolistically competitive firm is TRUE?

Accepted Answer

A)   A monopolistically competitive firm does not always equate marginal cost to marginal revenue because it uses other means to maximize profits.
B)   A monopolistically competitive firm maximizes profits by charging a price equal to marginal cost.
C)   A monopolistically competitive firm produces the quantity at the point at which the demand curve crosses the marginal cost curve.
D)   A monopolistically competitive firm maximizes profits when it produces the quantity at which marginal cost equals marginal revenue.E) A) and B)
F) B) and C)

Question 12

A firm's trademark is protected from misuse if it is registered with the

Accepted Answer

A)   U.S.D.A.
B)   U.S. Patent and Trademark Office.
C)   U.S. Supreme Court.
D)   F.C.C.E) B) and C)
F) A) and B)

Question 13

The demand curve faced by a monopolistically competitive firm is

Accepted Answer

A)   horizontal.
B)   vertical.
C)   downward sloping.
D)   upward sloping.E) A) and B)
F) A) and C)

Question 14

Monopolistic competition and perfect competition are different in that

Accepted Answer

A)   only monopolistically competitive firms advertise.
B)   only monopolistically competitive firms can earn economic losses in the short-run.
C)   only perfectly competitive firms maximize profits where marginal revenue equals marginal cost.
D)   only perfectly competitive firms are characterized by long-run economic profits of zero.E) A) and B)
F) B) and C)

Question 15

For the monopolistically competitive firm, in both the short run and the long run

Accepted Answer

A)   the demand curve is inelastic.
B)   price will exceed marginal cost.
C)   there will be no economic profit.
D)   production will be at minimum average cost.E) A) and D)
F) All of the above

Question 16

In the long run, both monopolistically competitive and perfectly competitive firms attain

Accepted Answer

A)   lowest cost production.
B)   positive economic profits.
C)   zero economic profits.
D)   productive efficiency.E) A) and C)
F) A) and D)

Question 17

Which will be true for a monopolistic competitor experiencing short-run losses?

Accepted Answer

A)   P > ATC
B)   P = ATC
C)   P 
D)   P < MCE) A) and B)
F) A) and C)

Question 18

The ATC curve and the AFC curve for information products (e.g., software)  in the short run are

Accepted Answer

A)   downward sloping.
B)   horizontal.
C)   upward sloping.
D)   vertical.E) B) and C)
F) All of the above

Question 19

The demand curve for the product of a monopolistically competitive firm

Accepted Answer

A)   is perfectly elastic.
B)   is unitary elastic.
C)   is downward sloping.
D)   is perfectly inelastic.E) C) and D)
F) All of the above

Question 20

When you see an advertisement on TV for a hair care product in which the actor using the product is depicted as beautiful and happy, this is

Accepted Answer

A)   informational advertising.
B)   direct market advertising.
C)   indirect market advertising.
D)   persuasive advertising.E) A) and B)
F) A) and C)

Exam 25: Monopolistic Competition

The ATC curve and the AFC curve for information products (e.g., software) in the short run are

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-Refer to the above figure. Economic profits for this firm are

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When you see an advertisement on TV for a hair care product in which the actor using the product is depicted as beautiful and happy, this is

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A firm's trademark is protected from misuse if it is registered with the

Correct AnswerverifiedShow Answer

When a pharmaceutical company advertises that its allergy medication is clinically proven to alleviate hay fever symptoms, the pharmaceutical company is engaging in

Correct AnswerverifiedShow Answer

Which of the following is NOT a characteristic of the demand curve faced by a firm in a monopolistically competitive market?

Correct AnswerverifiedShow Answer

In a monopolistically competitive market if the additional revenue generated from advertising equals the additional cost of advertising, the firm should

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The demand curve faced by a monopolistically competitive firm is

Correct AnswerverifiedShow Answer

A distinguishing characteristic of producers of information products is their

Correct AnswerverifiedShow Answer

The demand curve for the product of a monopolistic competitor is

Correct AnswerverifiedShow Answer

Judy has just looked through her favorite catalog that came in the mail and has placed an order. The catalog is an example of

Correct AnswerverifiedShow Answer

Which of the following is FALSE about a comparison between a perfectly competitive firm and a monopolistically competitive firm?

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A monopolistic competitor is in long-run equilibrium when

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In the long run, both monopolistically competitive and perfectly competitive firms attain

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The demand curve for the product of a monopolistically competitive firm

Correct AnswerverifiedShow Answer

Monopolistic competition and perfect competition are different in that

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For the monopolistically competitive firm, in both the short run and the long run

Correct AnswerverifiedShow Answer

Which will be true for a monopolistic competitor experiencing short-run losses?

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A monopolistic competitor is like a competitive firm in the long run, because

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Which of the following statements about a monopolistically competitive firm is TRUE?

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