question
Monopolistic competitors in the food industry, acting in their own self-interest, will often include a recyclable symbol on packaging used for their product as a means to:
answer
Differentiate their product (correct)
Be socially responsible
Be environmentally responsible
Be perceived more favorably in the marketplace (correct)
Be socially responsible
Be environmentally responsible
Be perceived more favorably in the marketplace (correct)
question
Monopolistic competition is different from perfect competition in that monopolistically competitive markets:
answer
Feature free entry and exit of firms from the industry in the long-run
Feature only price competition
Feature free entry and exit of firms from the industry in the short-run
Feature competition based upon things other than price (correct)
Feature only price competition
Feature free entry and exit of firms from the industry in the short-run
Feature competition based upon things other than price (correct)
question
Within a monopolistically competitive industry in the long-run, it would be expected that:
answer
Productive efficiency is attained (partial) *
Firms are not producing at the lowest possible average cost that technology (partial)
Price is equal to marginal cost (partial) *
Price is greater than marginal cost (partial) *
Firms are not producing at the lowest possible average cost that technology (partial)
Price is equal to marginal cost (partial) *
Price is greater than marginal cost (partial) *
question
Effective advertising has what effect on product differentiation?
answer
It decreases product differentiation
It has no effect on product differentiation
It increases product differentiation (correct)
It has no effect on product differentiation
It increases product differentiation (correct)
question
In what way(s) is a monopolistically competitive firm inefficient?
answer
It produces where marginal revenue is equal to marginal cost
It charges a price higher than marginal cost (correct)
It does not produce at the minimum of its average cost curve (correct)
It charges a price higher than marginal cost (correct)
It does not produce at the minimum of its average cost curve (correct)
question
Monopolistic competition is different from perfect competition in that, in the long-run:
answer
The characteristics of items sold will be more dynamic within monopolistic competition (correct)
Economic profit is positive for the monopolistic competitors, but not for perfectly competitive firms
Economic profit is zero for monopolistic competitors, but not for perfectly competitive firms
Society's resources will be under-allocated to production within a perfectly competitive industry
Economic profit is positive for the monopolistic competitors, but not for perfectly competitive firms
Economic profit is zero for monopolistic competitors, but not for perfectly competitive firms
Society's resources will be under-allocated to production within a perfectly competitive industry
question
Assuming that the monopolistic competitor faces the demand and costs depicted below and finds the profit maximizing level of output, what will be the firm's profit?
answer
$12
$-32 (correct)
$-64
$8
$-32 (correct)
$-64
$8
question
A successful advertising campaign results in ________.
answer
The firm's perceived demand curve to become more elastic, leading to more variability in pricing
The firm's charging a lower price for its product but selling more units
The firm's perceived demand curve to become more inelastic, so demand increases (correct)
The firm's charging a lower price for its product but selling more units
The firm's perceived demand curve to become more inelastic, so demand increases (correct)
question
Within a monopolistically competitive industry, it would be expected that:
answer
In the short-run, an innovative firm's price is greater than their average cost *
Firms make a positive or negative economic profit in the short-run *
In the long-run, a typical firm's price is greater than their average cost *
Firm's make a positive economic profit in the long-run *
Firms make a positive or negative economic profit in the short-run *
In the long-run, a typical firm's price is greater than their average cost *
Firm's make a positive economic profit in the long-run *
question
Imperfectly Competitive
answer
They have more influence over the price they charge than perfectly competitive firms, but not as much as a monopoly would or firms and organizations that fall between the extremes of monopoly and perfect competition
question
Monopolistic Competition
answer
Feature a large number of competing firms, but the products that they sell are not identical (ex. Banana Republic, J. Crew, and Nordstrom...)
question
Inventors of the Theory of Imperfect Competition
answer
Edward Chamberlain: Harvard University/published The Economics of Monopolistic Competition
Joan Robinson: Cambridge University/published The Economics of Imperfect Competition
Joan Robinson: Cambridge University/published The Economics of Imperfect Competition
question
Product Differentiation
answer
May occur in the minds of buyers. It is closely related to the degree of variety that is available. For example, many people could not tell the difference in taste between common varieties of beer or cigarettes if they were blindfolded but, because of past habits and advertising, they have strong preferences for certain brands. Advertising can play a role in shaping these intangible preferences
question
Which of the following statement(s) accurately describe(s) a monopolistically competitive firm?
answer
Its market it dominated by a small number of firms
It will try to differentiate it product to create a mini-monopoly (correct)
It competes against a large number of firms selling slightly different products (correct)
It will try to differentiate it product to create a mini-monopoly (correct)
It competes against a large number of firms selling slightly different products (correct)
question
The monopolistic competitor determines its profit-maximizing level of output (two scenarios)
answer
If the firm is producing at a quantity of output where marginal revenue exceeds marginal cost, then the firm should keep expanding production, because each marginal unit is adding to profit by bringing in more revenue than its cost. In this way, the firm will produce up to the quantity where MR = MC.
If the firm is producing at a quantity where marginal costs exceed marginal revenue, then each marginal unit is costing more than the revenue it brings in, and the firm will increase its profits by reducing the quantity of output until MR = MC.
If the firm is producing at a quantity where marginal costs exceed marginal revenue, then each marginal unit is costing more than the revenue it brings in, and the firm will increase its profits by reducing the quantity of output until MR = MC.
question
Total Cost can be expressed as:
answer
(price x quantity) *
(implicit cost + explicit cost)
(average fixed cost + average variable cost) (partial) *
(average cost x quantity) (Partial) *
(implicit cost + explicit cost)
(average fixed cost + average variable cost) (partial) *
(average cost x quantity) (Partial) *
question
Using the graph below, if Q = 10, Total Cost =
answer
90
70 (correct)
30
70 (correct)
30
question
Assuming that the monopolistic competitor faces the demand and costs depicted below and finds the profit maximizing level of output, what will be the corresponding price?
answer
$12
Less than $12
$18 (correct)
$15
Less than $12
$18 (correct)
$15
question
In monopolistic competition, the end result of entry and exit is that firms end up with a price that lies
answer
At the very bottom of the AC curve
At the very top of the AC curve
On the upward-sloping portion of the average cost curve
On the downward-sloping portion of the average cost curve (correct)
At the very top of the AC curve
On the upward-sloping portion of the average cost curve
On the downward-sloping portion of the average cost curve (correct)
question
Productive Efficiency
answer
Goods are being produced at the lowest possible average cost
question
Oligopoly
answer
When a few large firms have all or most of the sales in an industry
question
The demand curve faced by a monopolistically competitive firm is:
answer
Flat-perfectly elastic
Downward-sloping - market demand (incorrect)
Slightly downward-sloping - somewhat elastic
Downward-sloping - market demand (incorrect)
Slightly downward-sloping - somewhat elastic
question
Monopolistic competition is different from perfect competition in that monopolistically competitive markets:
answer
Involves competition that is all about efficiency minimizing average cost (incorrect)
Allows for positive economic profits in the short-run
Allows for positive economic profits in the long-run
Involves non-price competition in the form of variety
Allows for positive economic profits in the short-run
Allows for positive economic profits in the long-run
Involves non-price competition in the form of variety
question
If the firm is producing at a quantity of output where marginal revenue exceeds marginal cost, then ________.
answer
The firm's perceived demand will shift to the left
The excess profit would attract additional competition (correct)
Each marginal unit adds profit by bringing in less revenue than its cost
The firm should keep expanding production *
The excess profit would attract additional competition (correct)
Each marginal unit adds profit by bringing in less revenue than its cost
The firm should keep expanding production *
question
If monopolistic competitors must expect a process of entry and exit like perfectly competitive firms,
answer
They will wish to cooperate to make decisions about what price to charge
They will be unable to earn higher-than-normal profits in the long run (correct)
They will wish to cooperate to make decisions about what quantity to produce
They will be unable to earn higher-than-normal profits in the short run
They will be unable to earn higher-than-normal profits in the long run (correct)
They will wish to cooperate to make decisions about what quantity to produce
They will be unable to earn higher-than-normal profits in the short run
question
If a perfectly competitive market moved toward monopolistic competition, we might expect:
answer
Less advertising
A greater range of product differentiation, but higher price (correct)
A greater range of product innovation and a lower price
A smaller range of product differentiation, but a lower price
A greater range of product differentiation, but higher price (correct)
A greater range of product innovation and a lower price
A smaller range of product differentiation, but a lower price
question
A successful advertising campaign may allow competing monopolists to
answer
Sell a greater quantity (correct)
Charge a higher price (correct)
Increase its profits (correct)
Charge a higher price (correct)
Increase its profits (correct)
question
If each of two competing monopolists undertakes equally successful advertising efforts to attract consumers away from the other, the total result is ________.
answer
They will simply neutralize one another's efforts (correct)
They will both improve their industrial position
They will both increase market share
They will both improve their industrial position
They will both increase market share
question
A monopolistically competitive industry does not display ________ in either the short-run, when firms are making ________, nor in the long-run, when firms are earning ________ .
answer
Productive efficiency; economic profits or losses; negative economic profits
Allocative efficiency; economic losses; positive economic profits
Allocative efficiency; economic profits and losses; zero economic profits (correct)
Allocative efficiency; economic losses; positive economic profits
Allocative efficiency; economic profits and losses; zero economic profits (correct)
question
Perfect competition displays allocative efficiency because the social benefits of additional production, as measured by the price that people are willing to pay, are in balance with the ________ to society of that production.
answer
Total costs
Marginal Costs (correct)
Marginal Revenues
Marginal Costs (correct)
Marginal Revenues
question
In the competitive market for figure skate blades, manufacturers offer an array of products that are
answer
Distinctively different in a particular way
question
Why are the underlying economic meanings of the perceived demand curves for a monopolist and monopolistic competitor different?
answer
A monopolist faces the market demand curve and a monopolist competitor does not
question
A monopolistically competitive firm may earn abnormally high profits in the
answer
Short term, but the process of entry will drive those profits to zero in the long run
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