Chapter 13 Review Questions
b. profit of $480
Refer to the diagram for a monopolistically competitive firm in short-run equilibrium. This firm will realize an economic a. loss of $320 b. profit of $480 c. profit of $280 d. both diagrams b and c
c. $16
Refer to the diagram for a monopolistically competitive firm in short-run equilibrium. This firm's profit-maximizing price will be a. $10 b. $13 c. $16 d. $19
b. diagram b only
Refer to the diagrams, which pertain to monopolistically competitive firms. A short-run equilibrium entailing economic profits is shown by a. diagram a only b. diagram b only c. diagram c only d. both diagrams b and c
b. underallocated because long-run equilibrium occurs where price exceeds marginal cost
In monopolistically competitive markets, resources are a. overallocated because long-run equilibrium occurs where price exceeds marginal cost b. underallocated because long-run equilibrium occurs where price exceeds marginal cost c. overallocated because long-run equilibrium occurs where marginal cost exceeds price d. underallocated because long-run equilibrium occurs where marginal cost exceeds price
c. exceed MC but equal ATC
In the long run, the price charged by a monopolistically competitive firm seeking to maximize profit will a. be less than both MC and ATC b. exceed ATC but equal MC c. exceed MC but equal ATC d. exceed both MC and ATC
c. above marginal cost
In the short run, a profit-maximizing monopolistically competitive firm sets its price a. equal to marginal revenue b. equal to marginal cost c. above marginal cost d. below marginal cost
a. diagram a only
Refer to the diagrams, which pertain to monopolistically competitive firms. Long-run equilibrium is shown by a. diagram a only b. diabram b only c. diagram c only d. none of these diagrams
b. 10,000
The Herfindahl index for a pure monopolist is a. 100 b. 10,000 c. 100,000 d. 10
c. there are many close substitutes for its product
A firm is more likely to increase its total revenue by decreasing the price of its product if a. the supply of the product is perfectly elastic b. the demand for the product is perfectly inelastic c. there are many close substitutes for its product d. its product accounts for a small portion of a consumer's budget
c. low entry barriers
A monopolistically competitive industry combines elements of both competition and monopoly. The competition element results from a. the likelihood of collusion b. product differentiation c. low entry barriers d. mutual interdependence in decision making
c. monopolistic competition
The restaurant, legal assistance, and clothing industries are each illustration of a. countervailing power b. homogeneous oligopoly c. monopolistic competition d. pure monopoly
c. large number of firms and low entry barriers
Monopolistic competition is characterized by a. few dominant firms and low entry barriers b. large number of firms and substantial entry barriers c. large number of firms and low entry barriers d. few dominant firms and substantial entry barriers
c. P exceeds minimum ATC
Which of the following is correct for a monopolistically competitive firm in long-run equilibrium? a. MC = ATC b. MC exceeds MR c. P exceeds minimum ATC d. P = MC
b. In monopolistic competition, firms produce less than the output at which average total cost is minimized
Which of the following statements is correct regarding profit-maximizing firms in the long run? a. In perfect competition, firms produce an output at which price is less than marginal cost b. In monopolistic competition, firms produce less than the output at which average total cost is minimized c. In perfect competition, firms produce an output at which price is greater than marginal cost d. In monopolistic competition, firms produce more than the output at which average total cost is minimized