econ ch 11

This monopolistic competitor is in the long run taking a loss. long run making a profit. short run taking a loss. short run making a profit.

short run taking a loss.

Which demand curve would best represent a monopolistic competitor? D1 D3 None of these curves represent a monopolistic competitor. D2

D2

In the long run the monopolistic competitor ________ at peak efficiency and the perfect competitor ________ at peak efficiency. does not operate; does not operate operates; operates operates; does not operate does not operate; operates

does not operate; operates

Product differences are ___________ physical.

sometimes

If the firm is maximizing profits (minimizing losses), this firm charges a price of ______. $10.30 $14.10 $25.90 $18.40

$18.40

This profit-maximizing firm charges a price of about ______. $14.00 $15.20 $19.00 $11.70

$19.00

This profit-maximizing (loss-minimizing) firm is making a profit or loss of about __________. $480 -$450 $800 $500

-450

If this firm produces at its most efficient output level it would produce at about _____ units. 250 200 150 300

200

This profit-maximizing firm charges a price of ___________. $20.00 $24.00 $16.75 $22.00

24

This profit-maximizing firm is making a profit or loss of about __________. $310 $800 $710 $510

310

If this firm produced at its most efficient output level it would produce about _______ units. 60 50 40 70

40

This profit-maximizing firm is making a profit or loss of about ________. $400 -$280 $280 $200

400

This profit-maximizing firm produces a quantity of about ________ units. 40 45 50 55

50

This profit-maximizing (loss-minimizing) firm charges a price of _______. $55 $45 $35 $40

55

This profit-maximizing (loss-minimizing) firm produces a quantity of about ________ units. 80 70 90 100

70

If this firm produced at its most efficient output level it would produce _______ units. 140 50 115 80

80

Which one of these firms would be a monopolistic competitor? The only used car dealer within 300 miles of Livingston, Montana A local phone company A Tex-Mex restaurant in San Antonio, Texas AT&T

A Tex-Mex restaurant in San Antonio, Texas

Which of the following is NOT a characteristic of monopolistic competition? Some degree of product differentiation Some degree of control over price A tendency to rely on non-price competition A horizontal demand curve

A horizontal demand curve

Which of the following would not be a monopolistic competitor? Mother's café Andy's magic shop International Business Machines Mr. Nice Guy's rent-a-tuxedo

International Business Machines

Which statement is true? Most monopolistic competitors are large firms. None of these statements are true. Monopolistic competitors produce goods or services for which there are no close substitutes. Monopolistic competitors usually operate at the minimum point of their average total cost curves.

None of these statements are true.

Which statement is true? None of these statements are true. The monopolistic competitor is often a large firm. Most firms in the U.S. are not monopolistic competitors. Price discrimination is impossible under monopolistic competition.

None of these statements are true.

Which statement is true? None of these statements are true. The monopolistic competitor operates at the minimum point of her ATC curve. The monopolistic competitor may make a profit in the long run. The monopolistic competitor has a perfectly elastic demand curve.

None of these statements are true.

Which statement is true? Under monopolistic competition, product differentiation can take place only if there are physical differences among the products. The typical monopolistic competitor is a very large firm. The crucial feature of monopolistic competition is that there are very few firms in the industry. None of these statements are true.

None of these statements are true.

Which statement is false? Price discrimination enables the seller to increase her profits. Price discrimination is usually against poor people who can't afford to shop around. None of these statements are false. Price discrimination can be a disguised subsidy to the poor.

Price discrimination is usually against poor people who can't afford to shop around.

Which of the following statements are true? The demand curve of a monopolistic competitor is more horizontal (flatter) than a monopolist's demand curve. In the long run the monopolistic competitor is as efficient as the perfect competitor. The demand curve of a monopolistic competitor is identical to its marginal revenue curve. In the long run the monopolistic competitor will definitely make a profit.

The demand curve of a monopolistic competitor is more horizontal (flatter) than a monopolist's demand curve.

Which statement is true? The monopolistic competitor operates at an output that is the lowest point on the ATC. The monopolistic competitor can make a profit in the long run. None of these statements are true. The monopolistic competitor has a small influence on price because its products are differentiated.

The monopolistic competitor has a small influence on price because its products are differentiated.

A monopolistically competitive industry has identical products and ease of exit and entry. a differentiated product and the ability to make a long-run profit. a differentiated product and a small influence over price. a differentiated product and significant barriers to exit and entry.

a differentiated product and a small influence over price.

When a monopolistically competitive industry is in long-run equilibrium price equals minimum possible average cost. price equals marginal cost. firms earn zero economic profit. firms earn economic profit.

firms earn zero economic profit.

Each of the following is an example of price discrimination except high-priced tickets just behind the bench of the NBA championship team. student rates for subscriptions to Business Week. senior citizen discounts at restaurants. lower-priced movie tickets at "rush hour" to attract customers at dinner time.

high-priced tickets just behind the bench of the NBA championship team.

Monopolistic competition leads to ___________ prices, but ___________ product variety

higher; more

Peak efficiency _________ achieved under monopolistic competition.

is not

The monopolistic competitor is protected by substantial barriers to entry. has very little competition. produces a good or service that has no close substitutes. is usually a small firm.

is usually a small firm.

The monopolistic competitor is usually a small firm. can be a monopoly. produces at the minimum point of her average total cost curve. maximizes profits but does not minimize losses.

is usually a small firm.

If monopolistic competitors are taking losses, in the long run firms ________ and market price will ________.

leave the industry; rise

Assume a monopolistically competitive firm is producing at an output level at which marginal revenue is $15 and marginal cost is $18. The profit-maximizing firm should lower output. keep output constant. raise output. The firm should take none of these actions.

lower output

Monopolistic competitors have _______ rivals who produce _________ goods and services. None of the choices are correct. many; identical many; close substitute no; identical

many; close substitute

The typical monopolistic competitor may be a drugstore, restaurant, gas station, or dry cleaner. is a large firm. has a local monopoly. never advertises.

may be a drugstore, restaurant, gas station, or dry cleaner.

The typical monopolistic competitor never uses price discrimination. always competes on the basis of producing a product that is physically different from those of its competitors. is a large firm. may compete on the basis of physical differences, convenience, service, and ambience.

may compete on the basis of physical differences, convenience, service, and ambience.

Monopolistic competition differs from perfect competition because monopolistic competitors do not produce at the lowest point on the average total cost curve. monopolistic competitors can make a profit even in the long run. monopolistic competitors have a significant influence over the market price. monopolistic competitors have few firms in each industry.

monopolistic competitors do not produce at the lowest point on the average total cost curve.

If monopolistic competitors are making a profit in the short run, in the long run _____________ and squeeze out profits.

more firms enter the industry

Monopolistic competitors that give better deals to new customers than old customers assume that regular buyers have a ____________ demand than new buyers. more inelastic None of these choices are correct. more elastic less inelastic

more inelastic

You could conclude that existing firms will leave the industry. new firms will enter the industry. the industry is in the long run. it is unclear whether the industry is in the short run or the long run.

new firms will enter the industry.

You could conclude that new firms will enter the industry. existing firms will continue to make a profit, even in the long run. new firms will leave the industry. existing firms will leave the industry.

new firms will enter the industry.

Monopolistic competition may lead to each of the following except over-differentiation. excess capacity. peak efficiency. non-price competition.

peak efficiency.

Monopolistically competitive firms prevent the efficient use of resources because in long-run equilibrium price equals marginal cost. marginal cost is less than average total cost. price is greater than marginal cost. price is less than marginal cost.

price is greater than marginal cost.

The definition of monopolistic competition differs from that of perfect competition with respect to _______________.

product differentiation

Providing better service, ambience, or a convenient location are all forms of price discrimination. product differentiation. economies of scale. consumer surplus.

product differentiation.

The basis for monopolistic competition is economies of scale. product differentiation. price.

product discrimination

Product differentiation takes place in the minds of the sellers. is based solely on deceiving the buyer. is rare under monopolistic competition. takes place in the minds of the buyers.

takes place in the minds of the buyers.

The key aspect to product differentiation is ambience. convenience. physical differences. the buyer's mind.

the buyer's mind.

If a monopolistically competitive firm is making profits the entrance of new firms increases costs, thereby reducing profits. it can be assured of high profits for all time to come. the entrance of new firms decreases the demand facing the firm, thereby reducing profits. the entrance of new firms increases the demand facing the firm, thereby reducing profits.

the entrance of new firms decreases the demand facing the firm, thereby reducing profits.

In the long run if some firms are losing money in monopolistic competition the industry supply curve cannot decease because of high barriers to entry. the industry supply curve will decrease and market price will rise. the industry supply curve will increase and market price will fall. the industry supply curve cannot increase because of high barriers to entry.

the industry supply curve will decrease and market price will rise.

If demand curve D2 represents a monopolistic competitor and demand curve D3 represents a monopoly, then the monopolist has a more elastic demand curve than the monopolistic competitor. None of these choices are true. the monopolistic competitor has a more elastic demand curve than the monopolist. the monopolist and the monopolistic competitor have identical elasticity in their demand curves.

the monopolistic competitor has a more elastic demand curve than the monopolist.

The demand curve for monopolistic competitive firms is elastic because there are NOT many substitutes for the product. the products are identical. the products are unique. there are many substitutes for the product.

there are many substitutes for the product.

The definition of monopolistic competition differs from that of perfect competition with respect to the number of firms in the industry. in both the number of firms and the type of product. with respect to the type of product. in neither the number of firms nor the type of product.

with respect to the type of product.

Perfect price discrimination would eliminate consumer surplus. would maximize consumer surplus. would have only a small effect on consumer surplus. would have no effect on consumer surplus.

would eliminate consumer surplus.

In the long run, price is equal to _________________ cost for the monopolistic competitor.

average total

Monopolistic competition is similar to perfect competition for all of the following reasons except both have identical demand and marginal revenue curves. both make zero economic profits in the long run. both have many firms in each industry. both maximize profits at the output level where marginal revenue equals marginal costs.

both have identical demand and marginal revenue curves.

In the long run the monopolistic competitor will be _____________. taking a loss None of the choices are correct. making a profit breaking even

breaking even

In monopolistic competition, firms can have some market power because of barriers to exit from the industry. because of barriers to entry into the industry. by producing differentiated products. by virtue of size alone.

by producing differentiated products.