Question 1

Refer to the data. The Herfindahl index for this industry is

Accepted Answer

A)  97.
B)  3,378.
C)  9,700.
D)  3,369.

Question 2

The less elastic a monopolistic competitor's long-run demand curve, the

Accepted Answer

A)  less its excess capacity.
B)  higher its price relative to that of a pure competitor having the same cost curves.
C)  higher its long-run profits.
D)  lower its average total cost at its equilibrium level of output.

Question 3

Answer the question on the basis of the following demand and cost data for a specific firm.  With the demand schedule shown by columns (2) and (3) , in long-run equilibrium

Accepted Answer

A)  price will equal average total cost.
B)  total cost will exceed total revenue.
C)  marginal cost will exceed price.
D)  price will equal marginal revenue.

Question 4

Monopolistic competition entails a deadweight loss to society, even if the firms earn zero economic profits.

Accepted Answer

A) True 
 B)False

Question 5

Answer the question on the basis of the following demand and cost data for a specific firm.  Suppose that entry of firms into the industry changes this firm's demand schedule from columns 1 and 3 to columns 2 and 3. Maximum economic profit will

Accepted Answer

A)  decrease by $15.
B)  decrease by $150.
C)  decrease by $45.
D)  decrease to zero.

Question 6

Compared to a purely competitive firm in long-run equilibrium, the monopolistic competitor has a

Accepted Answer

A)  lower price and lower output.
B)  higher price and lower output.
C)  higher price and higher output.
D)  price and output that may be higher or lower.

Question 7

In the long run, a typical firm in a monopolistically competitive market earns positive economic profits.

Accepted Answer

A) True 
 B)False

Question 8

Two industries that have the same four-firm concentration ratio can have significantly different Herfindahl indexes.

Accepted Answer

A) True 
 B)False

Question 9

If an industry evolves from oligopoly to monopolistic competition, we would expect

Accepted Answer

A)  the four-firm concentration ratio to increase.
B)  the four-firm concentration ratio to decrease.
C)  the four-firm concentration ratio to remain the same.
D)  barriers to entry to strengthen.

Question 10

Suppose the Herfindahl indexes for industries A, B, and C are 672, 450, and 875 respectively. These data imply that

Accepted Answer

A)  market power is greatest in industry A.
B)  market power is greatest in industry B.
C)  market power is greatest in industry C.
D)  industry B is more monopolistic than industry A.

Question 11

The restaurant, legal assistance, and clothing industries are each illustrations of

Accepted Answer

A)  countervailing power.
B)  homogeneous oligopoly.
C)  monopolistic competition.
D)  pure monopoly.

Question 12

Answer the question based on the demand and cost schedules for a monopolistically competitive firm given in the table below.  What price will this monopolistically competitive firm charge to maximize profits?

Accepted Answer

A)  $16
B)  $12
C)  $20
D)  $8

Question 13

Refer to the data. Suppose that firms in this industry split up such that there were 100 firms, each with a 1 percent market share. The four-firm concentration ratio and the Herfindahl index respectively would be

Accepted Answer

A)  100 percent and 10,000.
B)  4 percent and 4.
C)  100 percent and 16.
D)  4 percent and 100.

Question 14

As firms exit from a monopolistically competitive industry in the long run, the remaining firms' profits will begin to rise.

Accepted Answer

A) True 
 B)False

Question 15

In theory, the representative firm in monopolistic competition earns only a normal profit. Why might that outcome not always occur in the real world?

Accepted Answer

Some firms may achieve sufficient produc...

Question 16

Brand names and packaging are forms of product differentiation under monopolistic competition.

Accepted Answer

A) True 
 B)False

Question 17

The demand curve faced by a monopolistically competitive firm

Accepted Answer

A)  is more elastic than the monopolist's demand curve.
B)  is less elastic than the monopolist's demand curve.
C)  will shift outward as new firms enter the industry.
D)  is more elastic than the demand curve faced by the purely competitive firm.

Question 18

A significant difference between a monopolistically competitive firm and a purely competitive firm is that the

Accepted Answer

A)  former has fewer barriers to entry into the industry.
B)  latter recognizes that price must be reduced to sell more output.
C)  latter's demand curve is perfectly elastic.
D)  latter differentiates its product.

Question 19

Suppose that total sales in an industry in a particular year are $500 million and sales by the top four sellers are $80 million, $25 million, $12 million, and $8 million, respectively. We can conclude that

Accepted Answer

A)  allocative efficiency will be achieved.
B)  this industry is monopolistically competitive.
C)  the concentration ratio is 35 percent.
D)  firms in this industry likely collude with each other.

Question 20

Answer the question on the basis of the following demand and cost data for a specific firm.  If columns 1 and 3 are this firm's demand schedule, maximum economic profit will be

Accepted Answer

A)  $60.
B)  $70.
C)  $90.
D)  $80.

Exam 13: Monopolistic Competition

If an industry evolves from oligopoly to monopolistic competition, we would expect

Correct AnswerverifiedShow Answer

A significant difference between a monopolistically competitive firm and a purely competitive firm is that the

Correct AnswerverifiedShow Answer

Suppose the Herfindahl indexes for industries A, B, and C are 672, 450, and 875 respectively. These data imply that

Correct AnswerverifiedShow Answer

Two industries that have the same four-firm concentration ratio can have significantly different Herfindahl indexes.

Correct AnswerverifiedShow Answer

Suppose that total sales in an industry in a particular year are $500 million and sales by the top four sellers are $80 million, $25 million, $12 million, and $8 million, respectively. We can conclude that

Correct AnswerverifiedShow Answer

Brand names and packaging are forms of product differentiation under monopolistic competition.

Correct AnswerverifiedShow Answer

Answer the question on the basis of the following demand and cost data for a specific firm. Suppose that entry of firms into the industry changes this firm's demand schedule from columns 1 and 3 to columns 2 and 3. Maximum economic profit will

Correct AnswerverifiedShow Answer

The demand curve faced by a monopolistically competitive firm

Correct AnswerverifiedShow Answer

In theory, the representative firm in monopolistic competition earns only a normal profit. Why might that outcome not always occur in the real world?

Correct AnswerverifiedSome firms may achieve sufficient produc...View AnswerShow Answer

Refer to the data. Suppose that firms in this industry split up such that there were 100 firms, each with a 1 percent market share. The four-firm concentration ratio and the Herfindahl index respectively would be

Correct AnswerverifiedShow Answer

Answer the question on the basis of the following demand and cost data for a specific firm. If columns 1 and 3 are this firm's demand schedule, maximum economic profit will be

Correct AnswerverifiedShow Answer

In the long run, a typical firm in a monopolistically competitive market earns positive economic profits.

Correct AnswerverifiedShow Answer

As firms exit from a monopolistically competitive industry in the long run, the remaining firms' profits will begin to rise.

Correct AnswerverifiedShow Answer

Refer to the data. The Herfindahl index for this industry is

Correct AnswerverifiedShow Answer

Monopolistic competition entails a deadweight loss to society, even if the firms earn zero economic profits.

Correct AnswerverifiedShow Answer

The restaurant, legal assistance, and clothing industries are each illustrations of

Correct AnswerverifiedShow Answer

The less elastic a monopolistic competitor's long-run demand curve, the

Correct AnswerverifiedShow Answer

Answer the question on the basis of the following demand and cost data for a specific firm. With the demand schedule shown by columns (2) and (3) , in long-run equilibrium

Correct AnswerverifiedShow Answer

Answer the question based on the demand and cost schedules for a monopolistically competitive firm given in the table below. What price will this monopolistically competitive firm charge to maximize profits?

Correct AnswerverifiedShow Answer

Compared to a purely competitive firm in long-run equilibrium, the monopolistic competitor has a

Correct AnswerverifiedShow Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified
Some firms may achieve sufficient produc...
View Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified