Question 1

If firms in a monopolistically competitive market are earning negative economic profits,it is likely that:

Accepted Answer

A)  firms will enter the market.
B)  firms will exit the market.
C)  the firms in the market will shut down immediately.
D)  the firms in the market will expand to try to capture lower costs per unit.E) B) and D)
F) None of the above

Question 2

The long run outcome of the monopolistically competitive firm:

Accepted Answer

A)  is not efficient.
B)  does not maximize profits.
C)  is the same as the short-run outcome.
D)  maximizes total surplus.E) None of the above
F) A) and C)

Question 3

The process of entry and exit into a monopolistically competitive market causes:

Accepted Answer

A)  the firm's demand curve to shift left and/or right.
B)  the firm's supply curve to shift left and/or right.
C)  the firm's average total cost curve to shift left and/or right.
D)  the firm's marginal cost curve to shift straight up and/or down.E) A) and B)
F) All of the above

Question 4

If a firm in a monopolistically competitive market has a demand curve shifting to the right,it is likely that:

Accepted Answer

A)  positive economic profits are being earned.
B)  firms are entering the market.
C)  the selling price is less than the average total cost of the firm.
D)  All of these statements are true.E) A) and B)
F) B) and D)

Question 5

The more firms are present in a market,the:

Accepted Answer

A)  more competition is likely to be present.
B)  less competition is likely to be present.
C)  more like a monopoly it will behave.
D)  more collusion is likely to occur.E) All of the above
F) C) and D)

Question 6

The process of entry and exit into a monopolistically competitive market continues until:

Accepted Answer

A)  profits are zero.
B)  long-run equilibrium is reached.
C)  price is equal to average total cost.
D)  All of these statements are true.E) A) and C)
F) B) and C) D

Question 7

A market that consists of only a few large firms is probably a:

Accepted Answer

A)  monopoly.
B)  perfectly competitive market.
C)  monopolistically competitive market.
D)  oligopoly.E) B) and D)
F) C) and D)

Question 8

If we were to compare the monopolistically competitive firm's long-run outcome to that of a perfectly competitive one,we would conclude that the monopolistically competitive firm:

Accepted Answer

A)  creates less total surplus.
B)  produces less.
C)  earns the same profits.
D)  All of these statements are true.E) A) and C)
F) All of the above

Question 9

These are the cost and revenue curves associated with a firm. 
Assuming the firm in the graph is producing Q1 and charging P3,it is likely:

Accepted Answer

A)  in long-run equilibrium.
B)  an efficient outcome.
C)  not maximizing profits.
D)  operating at a loss.E) C) and D)
F) A) and B)

Question 10

If a monopolistically competitive firm is suffering losses in the short run:

Accepted Answer

A)  the exit of competing firms will shift the firm's demand to the right.
B)  the exit of competing firms will shift the firm's demand to the left.
C)  the exit of competing firms will cause price to drop,but not affect the firm's demand curve.
D)  the exit of competing firms will cause price to rise,but not affect the firm's demand curve.E) None of the above
F) A) and C)

Question 11

When a market consists of a few large firms,it:

Accepted Answer

A)  must be perfectly competitive.
B)  is likely an oligopoly.
C)  must be monopolistically competitive.
D)  is likely a monopoly.E) A) and B)
F) None of the above B

Question 12

In practice,monopolistically competitive markets are:

Accepted Answer

A)  very common.
B)  very rare.
C)  virtually nonexistent.
D)  the only type of market that truly exists.E) All of the above
F) None of the above

Question 13

An oligopolist's production decision affects:

Accepted Answer

A)  its profits.
B)  the profits of other firms in the market.
C)  the prices charged by each firm.
D)  All of these statements are true.E) C) and D)
F) None of the above

Question 14

For an oligopoly,when the quantity effect outweighs the price effect,firms may have the incentive to:

Accepted Answer

A)  increase output.
B)  decrease output.
C)  not change the level of output.
D)  leave the industry.E) B) and D)
F) A) and D)

Question 15

In practice,oligopolistic markets are:

Accepted Answer

A)  fairly common.
B)  very rare.
C)  forbidden by the government.
D)  usually protected by the government.E) B) and C)
F) A) and D)

Question 16

Firms who effectively differentiate their product from their competitors' products do so by having:

Accepted Answer

A)  real,not just perceived,differences in product design.
B)  perceived,but not real,differences in product design.
C)  real or perceived differences in product design.
D)  None of these statements is true.E) B) and C)
F) All of the above

Question 17

If a firm in a monopolistically competitive market has a demand curve shifting to the right,it could be that:

Accepted Answer

A)  negative economic profits are being earned.
B)  firms are leaving the market.
C)  the selling price is less than the average total cost of the firm.
D)  All of these statements are true.E) B) and D)
F) All of the above

Question 18

These are the cost and revenue curves associated with a monopolistically competitive firm. 
According to the graph shown,the monopolistically competitive firm will produce:

Accepted Answer

A)  where MR = MC and will charge according to ATC.
B)  where MR = MC and will charge according to D.
C)  where D = MC and will charge according to MR.
D)  where D = MC and will charge according to ATC.E) B) and C)
F) A) and B)

Question 19

The demand curve facing the monopolistically competitive firm is:

Accepted Answer

A)  steeper than that of its competition.
B)  steeper than that of a monopolist.
C)  flatter than that of a perfectly competitive firm.
D)  None of these statements is true.E) None of the above
F) A) and C) D

Question 20

In the long run,firms in a monopolistically competitive market operate at:

Accepted Answer

A)  an efficient scale.
B)  a less-than-efficient scale.
C)  a more-than-efficient scale.
D)  Any of these could be true,depending on the individual firm.E) A) and B)
F) None of the above

Exam 15: Monopolistic Competition and Oligopoly

If firms in a monopolistically competitive market are earning negative economic profits,it is likely that:

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The long run outcome of the monopolistically competitive firm:

Correct AnswerverifiedShow Answer

The process of entry and exit into a monopolistically competitive market causes:

Correct AnswerverifiedShow Answer

If a firm in a monopolistically competitive market has a demand curve shifting to the right,it is likely that:

Correct AnswerverifiedShow Answer

The more firms are present in a market,the:

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The process of entry and exit into a monopolistically competitive market continues until:

Correct AnswerverifiedD

A market that consists of only a few large firms is probably a:

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If we were to compare the monopolistically competitive firm's long-run outcome to that of a perfectly competitive one,we would conclude that the monopolistically competitive firm:

Correct AnswerverifiedShow Answer

These are the cost and revenue curves associated with a firm. Assuming the firm in the graph is producing Q1 and charging P3,it is likely:

Correct AnswerverifiedShow Answer

If a monopolistically competitive firm is suffering losses in the short run:

Correct AnswerverifiedShow Answer

When a market consists of a few large firms,it:

Correct AnswerverifiedB

In practice,monopolistically competitive markets are:

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An oligopolist's production decision affects:

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For an oligopoly,when the quantity effect outweighs the price effect,firms may have the incentive to:

Correct AnswerverifiedShow Answer

In practice,oligopolistic markets are:

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Firms who effectively differentiate their product from their competitors' products do so by having:

Correct AnswerverifiedShow Answer

If a firm in a monopolistically competitive market has a demand curve shifting to the right,it could be that:

Correct AnswerverifiedShow Answer

These are the cost and revenue curves associated with a monopolistically competitive firm. According to the graph shown,the monopolistically competitive firm will produce:

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The demand curve facing the monopolistically competitive firm is:

Correct AnswerverifiedD

In the long run,firms in a monopolistically competitive market operate at:

Correct AnswerverifiedShow Answer

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D

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B

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D

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