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Long-run equilibrium under monopolistic competition is similar to that under perfect competition in that


A) firms produce at the minimum point of their average cost curves.
B) price equals marginal cost.
C) firms earn normal profits.
D) price equals marginal revenue.

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

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Compared to a perfectly competitive firm, the demand curve facing a monopolistically competitive firm is


A) more elastic because there are many close substitutes for the product of a monopolistically competitive firm.
B) less elastic because monopolistically competitive firms produce similar, but not identical, products.
C) just as elastic because there are many sellers in both markets.
D) more elastic because in the long run, the demand curve is tangent to the firm's average total cost curve.

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

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When a monopolistically competitive firm breaks even in the long run, this is equivalent to earning a zero accounting profit.

A) True
B) False

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Figure 13-9 Figure 13-9 -Refer to Figure 13-9. Which of the graphs in the figure depicts a monopolistically competitive firm that is earning economic profits? A) Panel A B) Panel B C) Panel C D) Panel A and Panel B -Refer to Figure 13-9. Which of the graphs in the figure depicts a monopolistically competitive firm that is earning economic profits?


A) Panel A
B) Panel B
C) Panel C
D) Panel A and Panel B

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

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Figure 13-6 Figure 13-6 -Refer to Figure 13-6. Suppose the above graph represents the relationship between the average total cost of producing notebook computers and the quantity of notebook computers produced by Dell. On a graph, illustrate the demand, MR, MC, and ATC curves which would represent Dell maximizing profits at a quantity of 100,000 per month and identify the area on the graph which represents the profit. -Refer to Figure 13-6. Suppose the above graph represents the relationship between the average total cost of producing notebook computers and the quantity of notebook computers produced by Dell. On a graph, illustrate the demand, MR, MC, and ATC curves which would represent Dell maximizing profits at a quantity of 100,000 per month and identify the area on the graph which represents the profit.

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Table 13-2 Table 13-2 Eco Energy is a monopolistically competitive producer of a sports beverage called Power On. Table 13-2 shows the firm's demand and cost schedules. -Refer to Table 13-2. What is the output (Q) that maximizes profit and what is the price (P) charged? A) P = $55; Q = 5 cases B) P = $50; Q = 6 cases C) P = $45; Q = 7 cases D) P = $40; Q = 8 cases Eco Energy is a monopolistically competitive producer of a sports beverage called Power On. Table 13-2 shows the firm's demand and cost schedules. -Refer to Table 13-2. What is the output (Q) that maximizes profit and what is the price (P) charged?


A) P = $55; Q = 5 cases
B) P = $50; Q = 6 cases
C) P = $45; Q = 7 cases
D) P = $40; Q = 8 cases

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

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A monopolistically competitive firm faces a downward-sloping demand curve because


A) it is able to control price and quantity demanded.
B) there are few substitutes for its product.
C) of product differentiation.
D) its market decisions are affected by the decisions of its rivals.

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

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

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Which of the following is true for a monopolistically competitive firm in long-run equilibrium?


A) P = ATC and MR = MC.
B) P = ATC and P = MC.
C) P > ATC and P > MR.
D) P > MR and MC = ATC.

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

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Which of the following describes a difference between the marginal revenue and demand curves of a perfectly competitive firm and a monopolistically competitive firm?


A) The perfectly competitive firm's marginal revenue and demand curves are the same; the marginal revenue curve of a monopolistically competitive firm lies above its demand curve.
B) The perfectly competitive firm's marginal revenue and demand curves are the same; the marginal revenue curve of a monopolistically competitive firm lies below its demand curve.
C) The monopolistically competitive firm's marginal revenue and demand curves are the same; the marginal revenue curve of a perfectly competitive firm lies below its demand curve.
D) The marginal revenue curve of a monopolistically competitive firm lies below its demand curve; the marginal revenue curve of a perfectly competitive firm lies above its demand curve.

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

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Being the first to sell a particular good can give a firm advantages over other firms that sell similar products. What is the name given to these advantages?


A) first-mover
B) first come, first served
C) follow the leader
D) first to market

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

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Consumers in monopolistically competitive markets face a tradeoff between paying prices greater than marginal costs and purchasing products that are more closely suited to their tastes.

A) True
B) False

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A firm that successfully differentiates its product or lowers its average cost of production creates


A) value for its customers.
B) entry barriers into its market.
C) a perfectly inelastic demand curve for its product.
D) economies of scale.

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

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A monopolistically competitive firm will


A) charge the same price as its competitors do.
B) always produce at the minimum efficient scale of production.
C) have some control over its price because its product is differentiated.
D) produce an output level that is productively and allocatively efficient.

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

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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) None of the above
F) A) and B)

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Suppose a monopolistically competitive firm sells 25 units at a price of $10. Calculate its marginal revenue per unit of output if it sells 5 more units of output when it reduced its price to $9.


A) $270.
B) $20
C) $4
D) $2.50

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

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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 13-11 Figure 13-11 -Refer to Figure 13-11. The diagram depicts a firm A) in a constant cost industry. B) in an increasing cost industry. C) in long-run equilibrium. D) that is making short-run losses. -Refer to Figure 13-11. The diagram depicts a firm


A) in a constant cost industry.
B) in an increasing cost industry.
C) in long-run equilibrium.
D) that is making short-run losses.

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

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Which of the following is true for a firm with a downward-sloping demand curve for its product?


A) Price, average revenue, and marginal revenue are all equal.
B) Price, average revenue, and marginal revenue are all different.
C) Price equals average revenue but is greater than marginal revenue.
D) Price equals average revenue but is less than marginal revenue.

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

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The demand curve of a monopolistically competitive firm


A) is horizontal because the firm must cut its price to sell more.
B) is perfectly elastic.
C) is downward sloping because it sells an identical product.
D) is downward sloping because it must cut its price to sell more.

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

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