eco chapter 17 exam 3

a downward sloping

A firm in monopolistic competition has ________ demand curve. a downward sloping an upward sloping a vertical a horizontal a U-shaped

less elastic; a higher price than before

A firm in monopolistic competition that introduces a new and differentiated product will temporarily have a ________ demand for its product and is able to charge ________. less elastic; a lower price than before less elastic; a higher price than before more elastic; a lower price than before more elastic; a higher price than before less elastic; the same price as before

average total cost is at a minimum.

A firm's efficient scale of production is the output at which its marginal cost is at a minimum. average total cost is at a minimum. profit is maximized. marginal revenue is at a maximum. marginal revenue equals marginal cost.

the difference between price and marginal cost.

A firm's markup is the difference between average total cost with and without advertising. the difference between demand and marginal revenue. a signal of product quality. the difference between price and marginal cost. the result of producing less than the efficient scale.

low; low

A market is considered competitive if the Herfindahl-Hirschman Index (HHI) is ________ and its four-firm concentration ratio is ________. high; high high; low low; high low; low between 30 percent and 70 percent; greater than 5,000

fixed costs.

Advertising costs and other selling costs are efficient. fixed costs. variable costs. marginal costs. considered as part of demand because they affect the demand for the good.

measure whether the market is dominated by a small number of firms.

Concentration ratios refer to the concentration of customers in a certain area. measure whether the market is dominated by a small number of firms. measure the concentration of a large number of firms in a certain area. have high values for perfect competition. measure how concentrated a firm's sales are among certain types of goods.

2,500.

Each of the four firms in an industry has a market share of 25 percent. The Herfindahl-Hirschman Index equals 3,600. 100. 625. 25. 2,500.

None of these answers is correct.

Excess capacity is the difference between a perfectly competitive firm's and a monopolistically competitive firm's output. difference between a perfectly competitive firm's and a monopoly's output. output at the maximum point of the ATC curve. difference between the price charged by a monopoly and a monopolistically competitive firm with the same costs. None of these answers is correct.

average total cost

For a firm in monopolistic competition, the efficient scale is the amount of output at which ________ is a minimum. fixed cost average total cost average variable cost average fixed cost marginal cost

a monopoly.

If the Herfindahl-Hirschman Index in the market for single-use cameras equals 10,000, then the single-use camera industry is best characterized as a monopoly. monopolistic competition. an oligopoly. perfect competition. either a monopoly or monopolistic competition.

i, ii, and iii

In which of the following ways do advertising and other selling costs affect a firm's cost curves? i only i and ii iii only i and iii i, ii, and iii

a large number of firms compete.

Monopolistic competition is a market structure in which firms face barriers to entry. a large number of firms compete. firms produce and sell an identical product. firms face perfectly elastic demand for their product. the firms have no ability to influence the price of their product.

the price is greater than marginal cost.

Monopolistic competition is judged to be economically inefficient because the price is greater than marginal cost. firms make zero economic profit in the long run. marginal revenue equals marginal cost. firms have deficient capacity in the long run. firms make an economic profit in the long run.

signal consumers that its product is high quality.

One reason a company advertises is to signal consumers that its product is high quality. lower its total cost. produce more efficiently. lower its variable costs. lower its fixed costs.

slightly different from the products of competing firms.

Product differentiation involves making a product that is slightly different from the products of competing firms. no different than the products of competing firms. very different from the products of competing firms. completely different from the products of competing firms. cheaper than the products of competing firms.

products sold by different firms are slightly different.

Product differentiation means firms sell products that are very dissimilar. products sold by different firms are slightly different. charging a higher price to consumers with high willingness to pay. charging a lower price to consumers with low willingness to pay. that a single firm sells many different types of products.

$50

The above figure shows a motel engaged in monopolistic competition with other motels. The equilibrium price at this motel is ________ per room. $20 $30 $40 $50 $10

some firms exit the industry, and the economic profits of the remaining firms increase.

The figure above shows a firm's demand and marginal revenue curves and its cost curves. If all firms in the industry have similar demand, marginal revenue, and cost curves as the firm in the figure above, in the long run nothing changes. some firms exit the industry, and the economic losses of the remaining firms decrease. some firms exit the industry, and the economic profits of the remaining firms increase. new firms enter the industry, and the economic losses of the original firms decrease. new firms enter the industry, and the economic profits of the original firms increase.

a downward-sloping demand curve

What does monopolistic competition have in common with monopoly? a large number of firms a downward-sloping demand curve the ability to collude with respect to price mutual interdependence barriers to entry

monopolistic competition.

An industry with a large number of firms, differentiated products, and free entry and exit is called perfect competition. monopolistic competition. oligopoly. monopoly. monopolistic oligopoly.

develop and market new products.

Because economic profits are eliminated in the long run in monopolistic competition, to make an economic profit, firms continuously shut down. exit the industry. develop and market new products. declare bankruptcy. decrease their costs by decreasing their selling costs.

can compete on the basis of quality.

Because of product differentiation, firms do not have to compete because their products are unique. cannot compete on price. can compete on the basis of quality. are unable to compete by using advertising. must compete on only price.

The measure would incorrectly show an uncompetitive market structure because many firms could open in Sunnyvale without any restrictions.

Girlfriend's Salon is the only hair salon in Sunnyvale, a small town. Which of the following statements correctly describes a concentration measure for salons in Sunnyvale? The measure would incorrectly show an uncompetitive market structure because many firms could open in Sunnyvale without any restrictions. The measure would incorrectly show an uncompetitive market because the measure does not reflect the low prices charged at Girlfriend's Salon. The measure would correctly show a monopoly exists in town because there are so few residents. The measure would correctly show a monopoly exists because Girlfriend's revenues are low. The measure would incorrectly show a perfectly competitive market exists because new salons can open and compete with Girlfriend's.

less than 40, the industry is considered monopolistic competition.

If the four-firm concentration ratio of an industry is near 100, the industry is considered very competitive. less than 40, the industry is considered an oligopoly. over 40, the industry is considered monopolistic competition. less than 40, the industry is considered monopolistic competition. close to 0, the industry is considered a monopoly.

make zero economic profit and have excess capacity

In monopolistic competition in the long run, firms ________. make zero economic profit and require more capacity incur an economic loss and require more capacity make an economic profit and have excess capacity make zero economic profit and have excess capacity make an economic profit and require more capacity

there are a large number of firms.

In monopolistic competition, each firm supplies a small part of the market. This occurs because there are barriers to entry. there are no barriers to exit. there are a large number of firms. firms produce differentiated products. there are a large number of buyers.

make zero economic profit.

In the long run in monopolistic competition, firms can make an economic profit. incur an economic loss. make zero economic profit. shut down if they are making zero economic profit. make either an economic profit or zero economic profit.

has; does not have

In the long run, a firm in monopolistic competition ________ excess capacity and a firm in perfect competition ________ excess capacity. has; has has; does not have does not have; has does not have; does not have might have; might have

where price equals average total cost, but average total cost is not at its minimum.

In the long run, a firm in monopolistic competition will produce where average total cost is minimized. where price equals average total cost, but average total cost is not at its minimum. zero output. any possible amount of output. where price equals marginal cost.

firms are free to enter and exit.

In the long run, firms in monopolistic competition make zero economic profit because firms are free to enter and exit. their products are similar but slightly different. of over-reliance on product marketing. of collusion among the various sellers. their demand curves are horizontal.

there are too many fast-food firms in the market.

It would be impossible for members of the fast-food industry to collude to fix prices because there are too many fast-food firms in the market. fast food is not durable. there are not enough fast-food firms in the market. the price of fast-food is too low. demanders would not buy from firms that collude.

account for barriers to entry.

One problem with measures of market concentrations is that they do not account for barriers to entry. allow for all market types. account for the difficulty in collecting total revenue data. create meaningful comparisons across industries. accurately measure concentration in markets with fewer than 4 firms.

short-run; making an economic profit

The above figure shows a motel engaged in monopolistic competition with other motels. the figure above shows the ________ equilibrium in which the motel is ________ . short-run; making an economic profit short-run; making zero economic profit long-run; making an economic profit long-run; making zero economic profit short-run; incurring an economic loss

loss; 100; $20

The figure above shows Firm X, a firm that is maximizing profit. The firm is making an economic ________ because it produces ________ units and charges ________ per unit. loss; 100; $20 profit; 100; $10 profit; 100; $30 loss; 120; $28 loss; 110; $20

It shifts leftward.

When a monopolistically competitive firm's demand curve shifts leftward, what happens to its marginal revenue curve? Nothing, the marginal revenue curve is unchanged. It disappears. It shifts rightward. It shifts leftward. None of these is correct because the effect on the marginal revenue curve depends on whether the demand was initially elastic or inelastic.

enter the industry, and demand will decrease for the original firms.

When firms in monopolistic competition are making an economic profit, firms will enter the industry, and demand will increase for the original firms. exit the industry, and demand will increase for the firms that remain. exit the industry, and demand will decrease for the firms that remain. enter the industry, and demand will decrease for the original firms. enter the industry and then will exit the industry.

25 percent

Which of the following four-firm concentration ratios is consistent with monopolistic competition? 100 percent 75 percent 25 percent 0 percent 91 percent

78 percent

Which of the following four-firm concentration ratios would be the best indicator of an oligopoly? 0.25 percent 31 percent 78 percent 100 percent 11 percent

few firms compete

Which of the following is NOT a characteristic of monopolistic competition? few firms compete easy entry and exit small market share differentiated product no barriers to entry or exit

P = ATC

Which of the following is TRUE about a firm in monopolistic competition in the long run? P = MC P = MR ATC = MC P = ATC MC = ATC

product variety

Which of the following is an advantage to society of monopolistic competition? production at the lowest possible average cost product variety Only essential costs are incurred. long-run profitability The firms have excess capacity so they are always willing to increase their production.

In the long run, a firm in monopolistic competition maximizes its profit at a point where price is equal to average total cost but the average total cost is not minimized.

Which of the following is correct? A firm in monopolistic competition does not have excess capacity in the long run. A firm in perfect competition operates at maximum average total cost in the long run. In the long run, a firm in monopolistic competition maximizes its profit at a point where price is equal to average total cost but the average total cost is not minimized. In the long run, a firm in monopolistic competition makes zero economic profit and its price is equal to the minimum average total cost. In the long run, a firm in monopolistic competition can make an economic profit because of product differentiation.

running shoes

Which of the following is the best example of a differentiated product? beets in the local supermarket diamonds airlines running shoes electricity

manufacturing of shirts

Which of the following is the best example of a monopolistically competitive industry? land-based long distance telephone service wheat farming the local electricity producer manufacturing of shirts cable television

P > MC for a firm in monopolistic competition, and P = ATC for a firm in perfect competition

Which of the following statements about a firm in long-run equilibrium is true? P > MC for a firm in monopolistic competition, and P = ATC for a firm in perfect competition MR > P for a firm in monopolistic competition, and P = ATC for a firm in perfect competition P = MC for firms in both monopolistic competition and perfect competition P = MC for a firm in perfect competition, and P < ATC for a firm in monopolistic competition Both answers P > MC for a firm in monopolistic competition, and P = ATC for a firm in perfect competition and MR > P for a firm in monopolistic competition, and P = ATC for a firm in perfect competition are correct.

ii and iii

Which of the following statements about product development in monopolistic competition is correct? i only ii only ii and iii i and iii iii only